Houston Foreclosure Prevention

by Richard Weaver on Nov. 30, 2014

Bankruptcy & Debt Real Estate  Foreclosure Bankruptcy & Debt  Bankruptcy 

Summary: Stopping foreclosure is something best handled by a Ch. 13 bankruptcy typically, as opposed to situations that would warrant a chapter 11 filing


Our Foreclosure Lawyers Explain the Differences

Throughout the nation, small businesses in every field are struggling to survive as the United States economy remains in monetary distress. Small businesses in Houston, Texas are no exception to this ongoing struggle, and many have ultimately chosen as a way to end the overwhelming financial difficulties they've experienced.

For the debtors that wish to stay an ongoing business, there are two bankruptcy options: Chapter 11 bankruptcy and Ch. 13. While each of these methods share many similarities, they are inherently different at their core. In order to ensure that you pursue the right bankruptcy for you and your business, you should speak to a Houston foreclosure attorney at our office.

What are the similarities?

Both Chapter 11 and Chapter 13 bankruptcy provide debtors with the opportunity to allow their businesses to continue while plans for restructuring their finances are proposed. Persons who pursue either of these types of bankruptcy can benefit in the following ways:

  • Debtors will be permitted to retain the property they need to continue the operation of their business
  • Debtors will be allotted more time to transfer and sell off assets that they no longer have need of or can no longer afford
  • Debtors can modify the terms of their payment for secured debts
  • Debtors can discharge / eliminate obligations which they will not be able to pay in the terms of the plan

Despite all of the beneficial similarities, many indebted business owners continue to favor Ch. 13 over Ch. 11 because of the higher costs and longer times associated with completing the Chapter 11 bankruptcy process.

Different Eligibility Requirements for Chapter 11 & Chapter 13

One of the most fundamental ways in which Chapter 11 and Chapter 13 bankruptcies differ is in their criteria for eligibility. While nearly all can file bankruptcy under Chapter 11, including corporations, small businesses, joint ventures, limited liability companies, partnerships, and individuals, far fewer persons are permitted to seek Ch. 13 bankruptcy. In fact, only individuals who can prove the receipt of steady income will be allowed to continue with a Chapter 13 bankruptcy.

Eligibility for Chapter 13 bankruptcy depends on other criteria as well. For example, this chapter of the Bankruptcy Code is governed by debt limitations that can change on a periodic basis. Depending on the amount of unsecured and secured debt that a person has amassed, he or she may not be eligible to partake in a Ch. 13. On the contrary, no debt or income requirements are in place which would otherwise limit a person from filing Chapter 11 bankruptcy.

Appointing a Trustee is Different for Ch. 11 & Ch. 13

Among the most recognizable differences between filing for Chapter 11 vs. Chapter 13 bankruptcy is whether or not a bankruptcy trustee is appointed to the case. For Chapter 11 bankruptcies, the trustees are not the rule but the exception, not a rule. What this means is that the court may elect to appoint a trustee to this type of case, but generally it will only do so if there is good reason. For example, if a debtor is connected to allegations of fraud or gross mismanagement of his or her finances, then a trustee may be necessary.

Chapter 13 bankruptcies are somewhat different in that a trustee is nearly always, without exception. Chapter 13 bankruptcy trustees play a limited role in the process, but they are always involved nonetheless. For instance, these trustees can be responsible for the collection of plan payments along with the distribution of proceeds to the respective creditor. A debtor's failure to adhere to the payments expected of him or her could be cause for the trustee to request that the case be dismissed from the court or converted to a Ch. 7 liquidation bankruptcy.

Advantages and Disadvantages of Each

Chapter 11 and Chapter 13 bankruptcies each come with their own set of advantages and disadvantages, as can be seen below.

Advantages & Disadvantages to Ch. 11 Bankruptcy

  • Advantage: Special provisions allow for a streamlined process which can expedite the entire experience
  • Disadvantage: Ch. 11 proceedings can be very complex
  • Advantage: If all statutory requirements are met, there will be no set time limit for the duration of the plan
  • Disadvantage: Chap. 11 proceedings can be very expensive to complete

Advantages & Disadvantages to Chapter 13 Bankruptcy

  • Advantage: Approval for a Chapter 13 bankruptcy is usually processed much faster than Ch. 11 cases
  • Disadvantage: No circumstances will allow for a Chapter 13 bankruptcy plan to be extended
  • Advantage: The period of commitment can be made shorter if each of the unsecured creditors are paid back in full ahead of schedule
  • Disadvantage: It can be difficult, if not impossible, to confirm a Ch. 13 repayment plan if large amounts of money are owned in the form of secured debt that needs to be paid in order to retain assets and continue business.

Perhaps the most evident and overwhelming benefit between Chapter 11 and Chapter 13 bankruptcies is the fact that more types of debt can be discharged in a Chapter 13 proceeding as opposed to a Chapter 11 proceeding.

Why work with Our Law Firm?

Whether your financial issues lead you to Chapter 11 bankruptcy, or they call for a Chapter 13 bankruptcy, a lawyer at our office is here to assist. Together, we have spent the last 85 collective years working on behalf of persons in need of professional legal representation, and we are prepared to do the same for you.

At our law offices, we recognize the inherent differences between Chapter 11 and Chapter 13 bankruptcies, and we can help you determine which is the best course of action given the circumstances of your case. Your first consultation with a member of our team is provided completely free of charge, so don't hesitate to contact our office today for the professional legal guidance that you both need and deserve at this time.

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