A person contemplating bankruptcy may benefit from considering Chapter 11 reorganization instead of Chapter 7 liquidation or Chapter 13 wage earner debt adjustment. Under Chapter 11, an individual remains in possession of their property under protection from the bankruptcy court while restructuring and reducing their debt. At Wernick Law, we have more than 20 years of experience helping individuals and businesses determine whether Chapter 11 bankruptcy is advisable for their circumstances and representing clients in Florida Chapter 11 cases.

Who May Benefit From Individual Chapter 11 Bankruptcy

Although most Chapter 11 cases are brought by businesses, the process is also available to individuals. If a person is considering bankruptcy but wants to avoid liquidating all their assets, has income that is too high to qualify for Chapter 7, and/or has more debt than is allowed for Chapter 13, Chapter 11 may be a viable option. Individual Chapter 11 bankruptcy may also help a business owner who personally holds substantial debt of their business.

Suddenly facing a significant income reduction or overwhelming medical bills are other reasons that individuals may choose Chapter 11. High net worth individuals facing extraordinary debt, such as from taxes or litigation, may also benefit from Chapter 11. Some individual Chapter 11 debtors have no income but have assets that can be sold to pay debts under a Chapter 11 plan.

While Chapter 11 has distinctive benefits, it is the most complex and time-consuming type of bankruptcy. Successfully navigating a Chapter 11 case requires representation by an experienced, knowledgeable lawyer.

Process for Individual Chapter 11 Bankruptcy

The Chapter 11 process for individuals is very similar to the procedure for standard Chapter 11 business bankruptcy. However, specific provisions of the Bankruptcy Code apply to Chapter 11 cases in which the debtor is an individual. In addition, the U.S. Trustee has guidelines and requirements that apply to individuals who file for Chapter 11.

The process begins with filing a petition in the bankruptcy court, along with specific financial information. The individual benefits from automatic stay protection that stops creditors’ collection efforts as soon as the petition is filed. The debtor stays in possession of their property and assets and is held to fiduciary standards in managing the bankruptcy estate for the benefit of creditors. In most cases, a trustee is not appointed in an individual Chapter 11 bankruptcy case, but guidelines and reporting requirements promulgated by the U.S. Trustee apply.

The debtor is responsible for filing a proposed reorganization plan, which is reviewed by a creditors’ committee appointed by the U.S. Trustee. There is no limit on the repayment period, but a plan usually provides for payment over a three- to five-year period. The plan typically preserves the debtor’s most important assets and uses income and the sale of other property to pay the debts over time.

If the creditors’ committee approves the plan, all remaining debt is discharged. The timing of the discharge is included in the plan. Failure to complete payments under the plan makes the debtor responsible for all outstanding obligations.

Advantages of Individual Chapter 11 Bankruptcy

Whether Chapter 11 provides a better alternative for an individual depends entirely on the person’s circumstances. Before making any decision, it is essential for an individual to talk with an experienced, skilled Chapter 11 bankruptcy lawyer to make a thorough evaluation of their unique situation. Generally, the advantages of Chapter 11 over other types of bankruptcy include the following:

• Unlike other types of individual bankruptcy, there is no upper limit on the amount of secured or unsecured debt for a Chapter 11 case, and there also is no means test (income requirement or limit).
• The debtor-in-possession approach of the Chapter 11 process avoids involvement of a trustee, generally gives the debtor control over assets during the process, and gives the debtor wide latitude in designing and carrying out a repayment plan to reduce and restructure debt.
• The automatic stay halts collection efforts.
• The debtor may be able to modify certain secured debts and renegotiate burdensome contract terms.
• The timelines for submission, payments, and completion of the reorganization plan are more flexible in Chapter 11 than in Chapter 13.

There are downsides to Chapter 11, including the procedural complexity and higher fees. Even so, Chapter 11 may provide an individual with a more appealing way to remain in control of their property and assets while safeguarding assets, minimizing debt, and working to achieve a fresh start.

Legal Matters Related to Individual Chapter 11 Bankruptcy

An individual Chapter 11 bankruptcy can arise from many different circumstances, some of which involve other legal matters. At Wernick Law, we handle many types of related legal matters as part of an individual Chapter 11 case, including:

• Internal Revenue Service (IRS) controversies, including income tax and payroll / withholding tax matters
• Florida Department of Revenue actions
• Federal and Florida Fair Debt Collection issues
• Medicare billing claims
• Department of Justice (DOJ) issues
• Federal Trade Commission (FTC) issues
• Asset protection issues
• Disputes involving lenders, landlords, suppliers, and shareholders

We also work with our Chapter 11 clients regarding asset protection after the conclusion of the bankruptcy case, to ensure that the value preserved or enhanced through the reorganization and restructuring is protected going forward.

Talk With Us About Individual Chapter 11 Bankruptcy in Florida

Wernick Law welcomes individuals and referring professionals to schedule a consultation about Chapter 11 bankruptcy for individuals by calling 561-286-7896 or using the online contact form. Based in Boca Raton, we serve clients in South Florida (including West Palm Beach, Broward County, and Miami), Southwestern Florida (including Naples and Fort Myers), Tampa, Orlando, Jacksonville, and elsewhere in the state.