Although it might not seem like it, if you are considering filing for bankruptcy, you do have options. One of those options is the type of bankruptcy you can file. While Chapter 7 and Chapter 13 bankruptcies might be most commonly associated with individuals, Chapter 11 is also an option for individual people, particularly for those who earn too much to qualify for Chapter 7 or who have too much debt to file for Chapter 13. As with the other types of bankruptcy, credit counseling for Chapter 11 is required.
What is Chapter 11?
Chapter 11 bankruptcy is a type of reorganization bankruptcy. That means that those who file it come up with a plan to repay any debts owed, instead of having the process wipe out those debts. The court has to approve the reorganization plan before it can take effect. Usually, bigger corporations file Chapter 11, since it lets them stay in business and come up with a plan to once again earn a profit, once the debts are paid. Smaller businesses and people who are self-employed can also file Chapter 11, as can individuals, although it is relatively rare for a person to file Chapter 11 for personal debts.
Credit counseling for Chapter 11 is required before an individual can file a petition for bankruptcy, according to the US Bankruptcy Court. The counseling needs to occur no more than 180 days before the filing and you’ll need to give the court proof that you completed it, in the form of a certificate given to you by the credit counseling agency.
Once you find an agency approved by the US Department of Justice, such as CESI, you will arrange a time to complete the counseling. Counseling before you file can help you see if bankruptcy is really your best option or if you’ll be able to manage your debts and develop a payment plan without filing.
Pre-filing counseling is part one of a two part counseling process. Individuals who file Chapter 11 are also required to complete a debtor education course before they make the final payment in their reorganization plan. While pre-filing counseling helps you see if bankruptcy is the right option, debtor education teaches you to better manage your money and to avoid debt in the future. Although it is a separate program from pre-filing counseling, a person has the option of working with the same agency for debtor education. After completing the course, a person should submit Form 23 to the court.
Whether a person files Chapter 7, 11, or 13, bankruptcy isn’t a decision to make lightly. Completing counseling before filing will help you make the decision will that provide the most benefit to you. The sessions don’t take much time and can be done from the comfort of your own home. Along with convenience, credit counseling is meant to be affordable and easy to manage within your monthly budget.
Image Source: Flickr
Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
CESI is NOT A LOAN COMPANY