Both consumers and businesses can file for bankruptcy through one of several options. Chapter 11 bankruptcy is most commonly associated with small businesses and large companies that have significant amounts of debts. What many people do not realize is that under certain circumstances, individual consumers can also file for Chapter 11.
Individual Chapter 11 bankruptcy filings are not common in Maryland, and they only account for about one out of every 1,000 consumer bankruptcy filings nationwide. Someone who is seeking debt relief through Chapter 11 must meet several requirements. First, he or she must have a substantial earning potential, and debts must also exceed the limits for Chapter 7 and Chapter 13 bankruptcy. For example, someone who earns a six figure income but then got in over his or her head because of poor investments may benefit from Chapter 11.
Consumers have not always been allowed to file for Chapter 11. Before a U.S. Supreme Court –SCOTUS — case in 1991, only businesses were allowed to pursue this form of bankruptcy. The SCOTUS ruling held that individual, non-business consumers were also eligible, opening up another option for consumers in Maryland and across the rest of the nation.
Chapter 11 bankruptcy is generally considered friendlier to debtors than Chapter 7 or Chapter 13. For example, an individual filing for bankruptcy may be able to reduce some of his or her debt despite objections from creditors. Deciding which form of bankruptcy to pursue can be confusing though, and there are benefits and drawbacks to each. Speaking with a knowledgeable attorney might make this decision easier for those who are weighing their options.