Chapter 11 Bankruptcy for Individuals and Professionals
The majority of people in Texas who choose to file for Chapter 11 Bankruptcy tend to be high net worth individuals who have too much debt and a significant income to fully repay the debts or they have debts that fall outside the statutory limits for filing a Chapter 13 Bankruptcy. Chapter 11 Bankruptcy protection is an option available to individuals but is not usually utilized by them. A Chapter 11 Bankruptcy allows qualified individuals (and businesses) to reorganize their obligations and repay their debts over time. A person must file a Chapter 11 if they have debts that total more than $336,900.00 in unsecured debt and $1,01,650.00 in secured debt pursuant to 11 U.S.C. § 109(e). Sometimes an individual Debtor owing just slightly in excess of the Chapter 13 debt limits may have to file a Chapter 11 Bankruptcy.
Although every situation is unique, some of the most common issues that motivate an individual or professional person to file for personal Chapter 11 Bankruptcy include:
- Divorce — marital settlement agreements, child support, alimony
- Medical Illness
- Loss of Income
- Failure in Business
- Loss of Professional License
- Commercial or Residential Foreclosure
- Loss of Contract
- Tax Problems - withholding taxes, sales tax, income tax or property tax
The typical person filing a Chapter 11 Bankruptcy is usually a professional or person of high net worth who makes or has previously made a significant amount of income. Most personal Chapter 11 Bankruptcies are filed because the individual experiences a lull or downturn in their income and need breathing room to reorganize their finances and get back on track.
There are all types of professionals and high net worth Chapter 11 Bankruptcy filers which include:
- Financial Planners
- Business Executives,
- Real Estate Developers
- Professional Athletes
There have been many high income professionals in , as well as many nationally known celebrities and famous individuals that have filed Chapter 11 Bankruptcy. Oftentimes, personal Chapter 11 filings are motivated by a divorce, tax problems, lawsuits, medical illness, or a decrease in professional income that suddenly leaves the individual with the inability to maintain the status quo of their current financial obligations. When these types of problems become to overwhelming to address, the filing of a Chapter 11 Bankruptcy may be the most responsible way to address financial obligations. Chapter 11 Bankruptcy can be a way to buy time, reorganize financial affairs, provide a breathing spell, and propose a plan to realistically repay the debts over time.
The filing of a Chapter 11 Bankruptcy by a professional, business owner, or high net worth individual allows personal reorganization, and a breathing spell while continuing to operate in their chosen profession, and of course while protecting their assets as allowed by law.
Although a Chapter 11 Bankruptcy can be a way for professionals and high net worth individuals to deal with debt, it does bring with it a number of legal requirements and responsibilities that should be considered. Anyone considering a personal Chapter 11 Bankruptcy filing should seek competent legal advice from an experienced bankruptcy lawyer who can inform them of the requirements, procedures, as well as the potential outcomes of filing for Chapter 11 Bankruptcy.
Most professionals are in a way “business owners” and their businesses and personal finances are often intermingled and intertwined. This close connection makes it extremely important to determine the potential impact on their business or profession as well as the possible challenges that may be faced throughout the pendency of the Chapter 11 case.
A Chapter 11 whether it is for an individual or a business is the most complex and time-consuming of all types of bankruptcy proceedings. Although Chapter 11 Reorganization Bankruptcy filings constitute less than 5 percent of all bankruptcy cases filed, it is estimated that as much as 90 percent of all time expended by the Bankruptcy Court involves Chapter 11 bankruptcy proceedings.
Some Chapter 11 matters include relief from stay motions, the use or sale of property which can include the use of cash collateral, assumption or rejection of executory contracts, leases, and the obtaining of credit by the bankruptcy estate. These issues must be dealt with independently, however the resolution of each individual issue often involves one or more evidentiary hearings, and one or more of these issues can affect the outcome of the others. A resolution to any or all of the above bankruptcy issues may required at the onset of a Chapter 11 bankruptcy filing. The resolution of one or more of these critical issues may be essential in determining whether a Chapter 11 bankruptcy proceeding will be given an opportunity for a potentially successful outcome or be a conversion to Chapter 7 liquidation.
In the context of a personal Chapter 11 Bankruptcy filing, if you add to the mix an IRS tax problem, a divorce, a lawsuit, a slump in a profession, or a foreclosure proceeding, it can become quite complicated.
Chapter 11 bankruptcies can be quite complex and time consuming. Individuals or professionals in Texas considering filing for bankruptcy relief under Chapter 11 must utilize an attorney, and hopefully one who has experience in handling Chapter 11 Bankruptcy cases.
Questions about Chapter 11 Bankruptcy for Individuals & Professionals?