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The Chapter 11 filing creates a new estate that can be taxed as a separate entity under 26 U.S.C. § 1398. This may be an advantage to the individual who has capital gains upon the sale of an asset since the tax liability will be paid by the estate.
The value of purchase money secured claims is based on the value of the collateral and not the amount of the debt as required by the hanging sentence at the end of § 1325(a). See 11 U.S.C. § 506(a)(2).
"Projected disposable income" applies to the "value of the property to be distributed under the plan" in a Chapter 11 case, whereas in a Chapter 13 case the "projected disposable income" must be paid to unsecured creditors. Thus, in Chapter 11, the debtor may be able to use disposable income to pay all obligations under the plan and consequently confirm a plan for less money. Compare § 1129(a)(15) with § 1325(b)(1)(B).
Chapter 11 debtors do not have to use the IRS standard deductions in determining "project disposable income," even when the debtor does not pass the means test under § 707(b)(2).
Chapter 13 is exempt from an involuntary petition under § 303(b).
Priority claims may be paid without interest over the term of the plan. This may be particularly beneficial if the debtor has significant tax obligations. Compare §1129(a)(14) with § 1322(a)(2). Additionally, under § 1322(a)(4), less than full payments of domestic support obligations that have been assigned to the government is possible if all of the debtor's "projected disposable income" is applied to payments under the Chapter 13 plan for a five year period. No similar provision exists under Chapter 11.
Plan payments may be less than five years. See 11 U.S.C. § 1325(b)(4).
The following debts are dischargeable: (i) Property settlement debts arising under a divorce decree are dischargeable. See 11 U.S.C. § 523(a)(15). (ii) Willful and malicious injury to the property of another are dischargeable. See 11 U.S.C. § 523(a)(6). (iii) Nonpecuniary tax penalties and debts incurred to pay a nondischargeable tax are dischargeable. See 11 U.S.C. § 523(a)(7) & (a)(14), (a)(14A), (a)(14B). (iv) other types of debts described in §§ 523(a)(10), (a)(11), (a)(12), (a)(16), (a)(17), (a)(18), and (a)(19).
The Debtor may dismiss a Chapter 13 case at any time. Compare § 1112(b) with § 1307(b). Furthermore, Chapter 13 debtors are not subject to the new standards for the appointment of a trustee or conversion or dismissal of cases under §§ 1104 & 1112.
The Chapter 13 plan process is faster, cheaper and can be accomplished without an accepting class. For example, no disclosure statement is required and consequently no discussion of potential tax consequences is necessary. See 11 U.S.C. § 1125(a)(1).
Upon conversion, the Chapter 13 debtor typically retains post-petition wages. See 11 U.S.C. § 348(f).
