Can An Individual File Chapter 11 Bankruptcy?

It is clear that an individual can file bankruptcy under Chapter 11; in some cases, it may be the only relief available.  Chapter 13 debt limits are not keeping up with the ability of American consumers to borrow money.  Skyrocketing property values and ever increasing conventional loan limits can quickly push consumer debtors past the secured debt limitations and make them ineligible for Chapter 13.

When a debtor is forced out of Chapter 7 by means testing, and they have too much debt for Chapter 13, a Chapter 11 may be the only option.  The use of Chapter 11 by individuals was questioned in some bankruptcy jurisdictions.  In 1991 the Supreme Court resolved the controversy and made it clear Chapter 11 was available to an individual.  In Toibb v. Radloff, 501 US 157, the Supreme Court cites section 109(d) as the source of the individual debtor’s right to file Chapter 11.  An individual may have the right to file a case but BAPCPA has made significant changes to Chapter 11 and this may substantially impact the individual debtor.

Credit counseling is now a requisite for even the multi-million dollar individual debtor.  It may do some good for a high roller to work through  income and expenses with a credit counselor.   Unfortunately, it is more likely to be just an extra cost and a minor annoyance.  At least a Chapter 11 debtor is not required to complete a financial management course such as is required of an individual to obtain a discharge under both Chapter 7 and Chapter 13.

New sections 1115, 1123(a)(8), and 1129(a)(15) create a requirement for the individual Chapter 11 debtor to commit future wages to creditors.  The debtor will no longer receive a discharge upon confirmation of a plan.  All plan payments must be completed before the discharge is entered under the revised statutory scheme.  These and other changes make an individual Chapter 11 much like a king sized Chapter 13.