There are six chapters available for debtors filing bankruptcy: Chapter
7, 9, 11, 12, 13 and 15. While it’s the chapter 11 that receives
most of the spotlight – chapter 7 and 13 are the most commonly filed
chapters by individual debtors. As an aside, chapter 9 is intended for
government municipalities, chapter 12 for family farmers and chapter 15
for international entities.
Chapter 11 was initially intended for business and corporate debtors and
not individual consumer debtors. This all changed in a landmark Supreme
Toibb v. Radloff which held that individuals are eligible to file chapter 11 and benefit
from the automatic stay against creditors. This is partially the reason
why chapter 11 is more complicated and requires greater preparation prior
to filing. The debtor in a chapter 11 has obligations that do not exist
in the more common filed chapter 7 and 13.
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Despite the additional obligations, some individual debtors will not qualify
under a chapter 7 or 13, and are therefore forced to file a chapter 11.
This is generally a result of significant income or they exceed the debt
limitation allowed in a chapter 13. Nevertheless, a debtor can file a
chapter 11 bankruptcy in an attempt to successfully restructure their
debt and save their home.