Four chapters permit reorganization of the debtor’s financial affairs by the restructuring of secured debts, the rejection of undesirable leases and executory contracts and the payment of whatever is required to be paid to unsecured creditors over time, pursuant to a court-approved plan. The restructuring chapters are chapter 9 (for Municipalities), chapter 11 (General Reorganization), chapter 12 (for Farmers and Fishermen) and chapter 13 (for Individuals with Regular Income).
Although chapter 7 is the most popular liquidation chapter, it is also possible to liquidate within one of the restructuring chapters. This might be done because a debtor having substantial non-exempt property may prefer to control the liquidation process, rather than leave it to a chapter 7 trustee, such as when the debtor believes he or she can get more for the property than the trustee, and thus realize a surplus, or a larger surplus, over the amount necessary to satisfy his or her obligation to creditors. Therefore, a debtor might choose to file under one of the reorganization chapters described below, rather than under chapter 7, and propose a A liquidating plan of reorganization, under which the debtor (rather than a trustee) would personally liquidate assets and make the required distributions to creditors.
Although chapter 13 is generally simpler and less expensive as compared with the other reorganization chapters, access to chapter 13 is limited. A chapter 13 debtor must have regular income and debts within certain limits. A corporation (a term which includes Inc.’s, LLC’s and LLP’s ) is not eligible to proceed under chapter 13. Furthermore, a chapter 13 plan cannot provide for restructured payments over a period that is longer than 5 years.