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Bankruptcy Basics: The Reorganization Plan

When you’re overwhelmed by debt, you have two bankruptcy options: Chapter 7, which discharges all unsecured debt in exchange for the liquidation (sale) of your nonexempt property, and one of the four reorganization bankruptcies. Although designed for different debtors and situations, each one permits individuals and entities with disposable income to restructure and pay down their debt without losing property.

Chapter 13

This bankruptcy chapter allows individuals, couples, and sole proprietors to reorganize their debts and repay them over a three to five-year period. Some debts, like child support arrears, support alimony, and income tax debt, have higher priority and must be repaid in full over the course of the repayment plan, while unsecured debts get whatever is left over.

If you file for Chapter 13, you can make your reorganization plan more affordable by stripping off junior mortgages if your home has fallen below the value of the primary mortgage and by cramming down some types of secured debt so you only pay the value of the property plus a lower interest rate.

Chapter 11 

While individuals whose debt exceeds the Chapter 13 limitations can file for Chapter 11, it is best known for enabling large businesses to remain open while they deal with their debt. The debtor proposes a debt repayment plan that must be approved by both the bankruptcy court and the creditors who are owed the most. If they can’t come up with an acceptable plan, the trustee or one of the creditors can create one and present it for a vote. Once your debt reorganization plan is confirmed, you can carry it out. 

Chapter 12 

Chapter 12 bankruptcy is designed to help farming and fishing operations reorganize their debts and regain solvency. You have 90 days after filing to propose a three-to-five year repayment plan that can involve seasonal payments instead of monthly ones. Your reorganization plan can include secured debt cramdown (such as farmland mortgages) and modification of secured debt payments to go beyond five years if necessary.

Chapter 9

Chapter 9 bankruptcy is strictly for municipalities and government bodies such as utilities. The reorganization plan and its approval are similar to the Chapter 11 process, with creditors and taxpayers being allowed to object.

Contact an Oklahoma Bankruptcy Attorney

If you are able to repay your debts over a specified payment period, bankruptcy chapters that include a reorganization plan can make it possible to retain property and, in the case of a business, stay open. At the Law Offices of B. David Sisson, we assist consumer and business debtors with reorganization plans that are fair to creditors while enabling the client to regain solvency as quickly as possible. To schedule a consultation today, please contact Attorney Sisson and his team today.