In an Individual Chap 11. Anyone else go through this?

[Anonymous]

Hi all,

I recently filled a Chap11 and just had my IDI. 

I went with an 11 as I likely wouldn't pass a means test, and didn't want to be tied into a 5 year 13 as I have bonus money from work expected next year and my wife may be able to start working in 2 years. Also I can lower my car loans without being subject to the 910 day cram down rule. 

I have a lot of tax debt that is aged. The IRS did file a lean but it's in a state where I don't own any property so it hasn't been perfectly. 

Next step will be the MOC and submitting our plan for balloting. Basically we are going to offer 5% on 200K of unsecured, pay the Morgatge as agreed, lower 3 car loans paying one off in cash and the other two at the original rate and length. 

It's a hell of a process and would love to hear other people's experiences. 

[despritfreya]

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@Anonymous wrote:

Hi all,

I recently filled a Chap11 and just had my IDI. 

I went with an 11 as I likely wouldn't pass a means test, and didn't want to be tied into a 5 year 13 as I have bonus money from work expected next year and my wife may be able to start working in 2 years. Also I can lower my car loans without being subject to the 910 day cram down rule. I have a lot of tax debt that is aged. The IRS did file a lean but it's in a state where I don't own any property so it hasn't been perfectly.  Next step will be the MOC and submitting our plan for balloting. Basically we are going to offer 5% on 200K of unsecured, pay the Morgatge as agreed, lower 3 car loans paying one off in cash and the other two at the original rate and length.It's a hell of a process and would love to hear other people's experiences. 

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I assume you are represented by counsel.  I assume you are not operating a business and therefore you did not file a Subchapter V.  I assume you understand the requirement of committing 5 years of disposable income (again, assuming this is not a Subchapter V).  I assume you understand that any secured creditor that is not being paid in full has an 1111(b) election.   I assume you understand that at least one impaired class needs to vote in favor of the Plan (again assuming this is not a Subchapter V).  Lastly I assume you understand the "absolute priority rule" (again, assuming this is not a Subchapter V). 

If all of my assumptions are correct then you should be successful as you probably already have determined how you are going to deal with the issues.  

Assuming you did not file a Subchapter V (which has different rules), if any are not correct please discuss all of this with a qualified attorney.  Chapter 11 (be it a small business case or not) is not for the faint of heart.

As to your inquiry of this Forum, I tend to doubt anyone is going to be able to give you their experiences.  I suspect that very few who frequent this forum have any Chapter 11 experience.

Des.

[DebtStinks]

@Anonymous  I'd take @despritfreya  advice as he/she is an attorney...I've just never got him/her to admit it. haha

[Anonymous]

Lol, yes to all assumptions and represented by an attorney who specializes in 11s. And no not a sub chapter V. 

Regarding income that was a reason for the 11. I'm in a interesting place. A significant amount of our monthly income (about 50%) is VA disability for both my wife and myself. It isn't used in the disposable income calc so while "5 years of disposable income" is committed it can be paid off in a lump sum or over a few months. The fact that the math is over 5 years but I can early pay is one of the things about the 11 over the 13 that were appealing. 

[etfink]

Well it's been a journey but got my plan confirmation entered into pacer today. 190k in unsecured reduced to 2k. IRS from 95K to 16k, Lowered the values on 3 cars, and 60 months to pay morgtage arrears. 

Will pay my 2k tommorow and make my first secured payments on the first and request discharge. 

whoo hoo 

[despritfreya]

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@etfink wrote:

Well it's been a journey but got my plan confirmation entered into pacer today. 190k in unsecured reduced to 2k. IRS from 95K to 16k, Lowered the values on 3 cars, and 60 months to pay morgtage arrears. Will pay my 2k tommorow and make my first secured payments on the first and request discharge. 

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Congratulations.  Now make that 1st payment so that you can get your final decree and end those quarterly fees to the UST.

Des.

[jmw1]

How much were the legal fees to pull this off? This sounds like a great result.  I'm wondering how did you learn about this chapter 11 strategy.  I know chapter 13 pretty well and 13s can have a great result but am surprised 11 was better than a 13.

[etfink]

7500 retainer and another 3000 in fees. It's a lot of work and most are not successful because it's so complex.  But for me the big benifit is unlike an 13 I'm out from under the thumb of the Trustee.  I don't have to make payments for 5 years. Only pay the percent of unsecured debt (2k in my case) to get my discharge.  

Untill I get my discharge, likley mid Aug, I act as a Debtor in Possession and I manage my own finances. I submit monthly reports that are filed but I can spend money as I see fit. 

[etfink]

EXACTLY. The worst part is mailing out checks to all my unsecured. I have almost 30 and many are under 1.00. Lol.  

[jmw1]

With the 13, we have to pay the trustee fee which can be as high as 10% of the plan payment.  Your costs look cheaper than a 13 when the trustee cut is added but of course that depends on the size of the 13 plan pament.

I came into the 13 not knowing anything and it took a long time for me to truly understand how a 13 works. I'm still trying to learn how an individual 11 works and it's even harder than understanding 13s. Your scenario is the only individual case I understand where an 11 is a lot better than a 13. You get to leave the 11 with a lump sum payment for the unsecureds at 2% while the 13s have to keep paying for five years in the hopes that the debtor will win the lottery, inheirit money, or get lawsuit money.  Once the 13 plan payment is engineered to be very low, it's a waste of time to be inside the 13 for five long years.  With an 11, someone with cash in an IRA and 401k could get their disposable income low and then use the 401k to pay off in a lump sum. There is no 13 trustee to object to your budget items. But how do you avoid the absolute priority rule and getting the impaired creditors to cooperate?  Anyway, I'm so happy you got such a great result even if I only partially understand how you got there.