Chapter 11 Bankruptcy for Individuals
Chapter 11 bankruptcy is most commonly used as a reorganization tool for businesses in financial distress. Chapter 11 bankruptcy for individuals, though, is an option in some cases. Here's a look at the circumstances that might prompt an individual to file for Chapter 11 and the alternatives individuals have available to them.
When Might Chapter 11 Bankruptcy for Individuals Work?
Chapter 11 bankruptcy comes with certain benefits, compared to Chapter 13, which is the type of reorganization intended exclusively for individuals.
- No debt limits: Unlike Chapter 13 bankruptcy, which offers a similar form or debt reorganization, Chapter 11 cases come with no debt limits. This is part of the reason why corporations are often able to reorganize under Chapter 11.
- More flexibility: While Chapter 13 provides a streamlined path to repayment and debt discharge, Chapter 11 offers more flexibility to filers. This can be beneficial for filers who are financially savvy and interested in pursuing a specific path to debt elimination.
- Debtor in possession: In Chapter 13 and Chapter 7 bankruptcy, the bankruptcy trustee is the person in charge of the case and the bankruptcy estate. In some Chapter 11 cases, the filer may be a fiduciary for creditors, or "debtor in possession." This means that the filer is nominally in charge of many aspects of the bankruptcy case but must act in the best interest of the creditors.
- Business options: Individuals who own a business may find Chapter 11 a useful way to reorganize their business holdings and eliminate their debts.
What Are the Shortcomings of Chapter 11 for Individuals?
One reason Chapter 11 bankruptcy may not work for an individual is that it is more expensive than both Chapter 13 and Chapter 7. Because of the flexibility Chapter 11 allows filers, and the fact that it is typically used by businesses, it costs more to file under this chapter.
Simply submitting a Chapter 11 petition to the bankruptcy court costs $1,000 plus $39 in administrative fees.
Would Chapter 11 Bankruptcy for Individuals Make Sense for Me?
If you're interested in learning more about the potential benefits and drawbacks of Chapter 11 bankruptcy for individuals or if you’d like to learn more about how the different types of bankruptcy compare, you can take this opportunity to speak with a bankruptcy lawyer near you.
Simply fill out the free case review form below to arrange a no-obligation consultation with a local bankruptcy attorney today.