Chapter 11 Individual Bankruptcies
The process of filing a Chapter 11 and obtaining confirmation of the debtor's Chapter 11 Plan can be quite complex and costly. Accordingly, most Chapter 11 bankruptcy cases are filed by business entities. However, individuals are not precluded from seeking Chapter 11 relief, and in appropriate cases – usually involving individuals with large liabilities or engaged in complex business dealings – Chapter 11 bankruptcy may be the best solution for an individual with financial problems.
A typical individual Chapter 11 client is one who falls into one of three categories: 1) an individual who has a lot of complex, usually business-related debt but also a lot of assets and/or high income, which can be used to fund or otherwise support a Chapter 11 Plan; 2) an individual who does not fall within certain parameters required for Chapter 7 or Chapter 13 bankruptcy; 3) an individual with a business that could be disrupted by a Chapter 7 bankruptcy; or 4) an individual who needs to reorganize debt but who also needs greater flexibility in order to accomplish his or her goals.
One of the reasons that many individuals try to avoid a Chapter 11 bankruptcy is because the law governing individual Chapter 11 bankruptcies is not very different from the law governing business Chapter 11 bankruptcies. Accordingly, the requirements of such a bankruptcy can be quite onerous on an individual. Nevertheless, a Chapter 11 may be a needed solution for an individual in financial straits. It may be the only way for an individual to keep creditors at bay while retaining his or her assets, business or income.
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