According to an article in Bloomberg, the number of wealthy Americans who filed Chapter 11 bankruptcy jumped 73 percent in the second quarter of 2009 from a year earlier. The article said: “More individuals or families with at least $1,010,650 in secured debt and $336,900 unsecured are using Chapter 11 of the U.S. bankruptcy code typically associated with business reorganizations.” The foreclosure crisis and falling home prices are leaving many wealthy individuals unable to refinance or sell property that is rapidly declining in value. Many wealthy individuals who were flush in cash and credit during the boom, are now finding their credit lines maxed out with no opportunity for extensions or new loans. This situation leaves many vulnerable and in need of the protections offered by Chapter 11 bankruptcy. Many of even the wealthiest Americans have overextended themselves financially during the real estate boom by buying homes far outside of their means and/or accruing debt that morphs their total income and net worth. Fortunately for them, Chapter 11 bankruptcy gives debtors time to create an effective plan to repay their debts through bankruptcy. It also offers the same automatic stay protections as other types of bankruptcy, forbidding creditors from seizing assets or engaging in any other actions to collect on the debt. Unfortunately, Chapter 11 bankruptcy does not offer debtors the opportunity to completely discharge their debts like Chapter 7 bankruptcy ; but it does give debtors the flexibility to repay and/or settle debts in ways that would be nearly impossible outside of bankruptcy.
