Monthly Archives: April 2017

Chapter 11 Bankruptcy For Individuals

Most attorneys do not handle bankruptcies, and,

Chapter 11 bankruptcy
Chapter 11

most attorneys who handle bankruptcies do not

handle Chapter 11 bankruptcy cases.

I have done them for, well, decades.

I do not have a pending chapter 11 case for the

first time in a long time.

Why Do Individuals File Chapter 11?

First, there is a debt limit for filing Chapter 13, so, if you need to file a payment plan bankruptcy, and you owe too much money, you have to file Chapter 11.  Which cost more, a lot more, usually, and is more complicated.

As of April 1, 2016, if your secured debts (mortgages and liens) add up to more that $1,184,200, or your unsecured debts add up to more than $394,725, you cannot file Chapter 13 bankruptcy.

A new study funded by the American Bankruptcy Institute, of which I am a member, shows that money folks chose Chapter 11 even thought they were not over the debt limit.

I think all of my individual Chapter 11 clients were over the debt limit, mostly because of mortgages that became unsecured when the real estate bubble burst.

The study covered most of the individual Chapter 11 cases filed in 2010 and 2013, and found that:

For 2010, more than a quarter of the debtors in our random sample recorded liabilities on

their full schedules that fell below the secured and unsecured debt limits then in effect for

chapter 13. The percentage shot up in 2013. Approximately 47% of the individuals in our

random sample qualified for relief under chapter 13 yet filed for chapter 11.

There are other reasons for individuals to prefer Chapter 11 bankruptcy to Chapter 13.

In Chapter 13, there is a trustee.  In Chapter 11, you are your own trustee.

In Chapter 13, your plan is due in the first two weeks after you file, as opposed to 4 months in a Chapter 11 bankruptcy.

So, you have more control over your property, and, more time to deal with your creditors.

What Is the Success Rate for Individual Chapter 11 Cases?

Most Chapter 11 cases, individual or business, are dismissed or converted to another bankruptcy Chapter, usually Chapter 7.  This is also true of most Chapter 13 cases.

From the same ABI study:

We defined success several ways in the Study, but in this summary I use the term “success” to mean either (1) plan confirmation or (2) plan confirmation coupled with having avoided conversion or dismissal for the 881-day period starting December 31, 2013. Approximately 39% of the debtors in the random sample succeeded, using plan confirmation as the definition of success. But several plans failed, dropping the success rate to about 36%.

Most of the individual cases I have handled had plans confirmed.

And, the study found, no surprise, that you are more likely to succeed if you hire an attorney experienced in handling individual Chapter 11 bankruptcy cases.

Does attorney experience affect chapter 11 success? To answer that question, we created three groups of attorneys based on the total number of individual chapter 11 cases that they handled of the 6,666 cases in 2010 and 2013: (1) low experience (1-2); (2) mid experience (3- 10); and (3) high experience (11 or more). We found that attorneys with more experience had higher rates of success than attorneys with less experience. This finding, however, was statistically significant only for the comparison between low and high-experience attorneys. Success rates were significantly higher statistically in cases handled by high-experience as opposed to low-experience lawyers.

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Consumer Bankruptcy News

Consumer bankruptcy filings are sure to go up. Mortgage debt is one reason.  The government just keeps pushing out mortgages to people who cannot otherwise get them.  Those with lower credit scores and income. Which people, of course, default more often. People who cannot pay their debts are the ones who file bankruptcy. Mortgage DebtContinue Reading