In contrast to the liquidation approach, when you opt for a reorganization Chapter 11, you’re not selling off assets. You’re just restructuring your debt in a way that’s more favorable to you.

In many ways, a reorganization Chapter 11 “rhymes” with a Chapter 13. For instance, you get the ability to make payments to creditors.

This tool is particularly useful for people who have multiple residences. For instance, maybe you own a primary house in New Jersey, a beach house in South Florida and a small cottage up in Maine. These homes are lovely, and you’re grateful to have them, but they are over-encumbered. You want to keep your properties. Unfortunately, no one’s allowing you to get loan modifications. You need to get the banks to work with you to keep these notes. What can be done?

Depending on circumstances, a Chapter 11 reorganization may fit the bill. It’s a complex process, and there’s a lot of negotiation involved, but you can force the banks to enter into a Chapter 11 plan agreement. This functions similar to a loan modification. You effectively funnel all the debt on all your properties into one agreement.


Often, over-leveraging is the problem that brings about this scenario. For instance, you refinance one house to finance a second one, but then the market isn’t as healthy as you’d like, and you find yourself vulnerable. There’s still equity in the property, and you’re not upside down on it. But maybe your income went down at the same time due to a medical emergency, and now you face a perfect storm. You could do a 30 year mortgage, but you only have a 15 year mortgage in place, and the bank has too many guidelines to allow a modification. The Chapter 11 may be the solution.

Another example: let’s say you’re downsized out of good job, or you get sick. You’re now at 60% of previous pay. You miss mortgage payments and fall 6 months behind. The bank won’t talk to you. If this happens to five properties at once, you can’t fix the situation with Chapter 13! You need a reorganization 11.

The experienced attorneys at Lucid Law can clarify your options and suggest smart strategies to get you to your goals. Whether you’re considering filing for reorganization Chapter 11 bankruptcy or just in need of an intelligent, global assessment of your debt relief options, we’d love to talk. Please call us at (908) 350-7505.