Chapter 11 Bankruptcy — An individual may file under chapter 11; however, the provisions of chapter 11 are generally used to reorganize a business. Chapter 11 allows the debtor to continue its business operations by means of a plan of reorganization, which must meet certain statutory criteria. 11 U.S.C. §1129. By enacting chapter 11, Congress gave the debtor a chance to restructure its finances so that it may continue to operate, provide its employees with jobs, pay its creditors, and produce a return for its stockholders.
Because chapter 11 envisions an ongoing business, the most likely persons to have knowledge of the operation and details of the business are the existing managers who normally continue operations during the chapter 11 process. A major rationale business reorganizations is that the value of a business as an ongoing concern is greater than it would be if its assets were sold. When a business develops financial difficulties, such as not being able to pay its creditors due to cash flow problems, it may consider filing a chapter 11 bankruptcy.
If the business can extend or reduce its debts or drastically lower its operating cost, it often can be returned to a viable state. Generally, it is more economically efficient to reorganize than to liquidate, because doing so preserves jobs and assets. Cooperation among the various interests is crucial to a successful reorganization.
I am considering Chapter 11 bankruptcy. I have some business purchases that have mortgages/loans with personal quarantees. I just had my home steaded property appraised. I have a first mortgage and an equity line. The appraisal came in lower than my first (primary) mortgage. The equity line (mortgage) is far more than the appraisal on my house. My question is this: My appraisal came in above the amount owed on the first mortgage and the equity line is well above the appraisal, can I strip off the equity line (mortgage) at a reduced amount with chpter 11?