The following is an example of a married couple’s need to file a chapter 11 bankruptcy reorganization as opposed to a chapter 13 bankruptcy reorganization. Although, the fees and costs for chapter 11 are much higher than those for chapter 13, debtors whose unsecured debt totals exceed $362,500, are not eligible under Bankruptcy Code section 109(e) to file chapter 13. Congress placed these limits on individual debtors and married couples. Without the opportunity to file under chapter 11, individual debtors and married couples would be faced with only the choice of a liquidation of non exempt assets under chapter 7 of the Code. Statistics maintained by the Court reflect that for many years now, attorney Robert H. Cooper of The Cooper Law Firm in Greenville, South Carolina has filed more individual chapter 11 cases than any other lawyer or law firm in the entire state of South Carolina. Frankly, I am constantly amazed at the number of people, including bankruptcy lawyers, who do not realize that individuals and married couples can file for reorganization of their financial commitments under chapter 11 of the United States Bankruptcy Code. The great majority of the public, including attorneys, think that only corporations and other business entities can file under chapter 11, yet it has been over 22 years, since the United States Supreme Court decided that individuals and married couples can in fact file under chapter 11. I recently sent a letter to a couple with whom I had previously met, and in the letter duplicated below, I explained how chapter 11 works for individuals and married couples.
When I last met with you and your husband, we discussed the fact that you both need a chapter 11 reorganization, instead of a chapter 13 for a number of reasons. A chapter 11 is similar to a chapter 13, but on a larger scale. Also, instead of having a chapter 13 trustee make decisions regarding your case, you and your husband make all such decisions in a chapter 11. You both are “debtors-in-possession”, which is equivalent to a trustee. This means you remain in possession and control of all of your assets, and you make the day to day decisions regarding your case. Of course, you do this with my legal and financial advice. In a chapter 13, you begin paying a trustee 30 days after you file your case, and she distributes the funds to your creditors. However, in chapter 11, you pay only your secured creditors for the first nine months of your case. Secured creditors are creditors that have liens on your property, such as your house and car. Your unsecured creditors would have to wait until month ten of your case, before expecting monthly payments from you. Those monthly payments are calculated by me. They do not include any interest, and those payments generally are paid over a period of 60 months. You will issue all checks yourself without a middle person doing so. Once I obtain the Bankruptcy Judge’s Order Confirming our repayment plan that I file with the Court, you will have a copy with all new amounts due, and all creditors will have a copy. Therefore, you all know what to expect. Any questions regarding the plan are referred to me as the proponent of the plan.
The fees for chapter 11 are much higher than those for chapter 13. The attorney’s fees for a couple’s chapter 11 are $15,000 plus the court charges a $1,213 filing fee. We would subtract from that total the amount of money you have already paid us. The remaining balance could be paid at $1,000 per month, beginning January 1, 2013. Remember that you will not be paying any of your other creditors, except your secured creditors in the first nine months of your case. This would allow you to pay the $1,000 per month attorney’s fees. That is how we handle chapter 11 cases.
I do not know at present the amount that you would be paying to your unsecured creditors. You know the amount per month of your basic necessities, such as food, clothing, utilities, gasoline, etc. as you have a record of that, for example, for the year 2012. You also know the monthly amounts for your secured debts. In order to determine the monthly total of payments to unsecured creditors in a chapter 11, you would take the average of your net (take home) pay, and subtract from that your average monthly basic necessities, plus your secured monthly payments. It is this left over amount that we call “disposable income”, and the Bankruptcy Code requires that you pay your average “disposable income” to your unsecured creditors for a minimum of five years, which is 60 months. If, for example, by paying your unsecured creditors your average monthly “disposable income” for 60 months, you end up paying them 50% of their total debts without interest, the remaining 50% is forgiven forever. They would never be able by law to demand payment for the remaining balance. This is called a “discharge”, and a federal injunction remains in place forever prohibiting those creditors from ever trying to collect the balance. Keep in mind that if you owe $100,000 in unsecured debt, contractually you would likely end up paying $300,000, due to interest added to the principal, and if you make the monthly minimum payments under the contract, it would literally take you a life time to payoff the debt. With no interest being paid in chapter 11, this saves a tremendous amount of money, and payments are for 60 months, and not a lifetime, and you obtain your discharge at the end with a “fresh start” going forward thereafter.
Therefore, as you see, some debtors end up paying 25% to unsecured creditors, and others may end up paying 50%, some 70%, and occasionally others would end up paying 100% during the 60 month repayment period. It all depends on “disposable income.” Although, equity is sometimes a factor, disposable income is ordinarily the prevailing factor. Please consider all factors upon reviewing this information, and feel free to contact me personally with further questions or concerns. I look forward to helping your family resolve its current financial dilemma.
With warmest personal regards, I remain
Bob Cooper