National Study of Individual Chapter 11 Bankruptcies

Individuals account for more than a quarter of chapter 11 bankruptcy filings, and this share has grown over time. For individuals, chapter 11 is more expensive and complicated than the much more common chapter 13 because the applicable rules are a hybrid of those that apply in chapter 13 and those that apply to entities in chapter 11. Some debtors may be forced into chapter 11 by chapter 13's debt limits, but many debtors who are eligible for chapter 13 choose chapter 11. Perhaps the hybrid nature of individual chapter 11 cases is justified because the individuals who use chapter 11 look like a blend of the typical chapter 13 debtor and a small business: they have much greater assets, debts, income and expenses, and the overwhelming majority are operating some type of business. Real estate also plays a significant role in chapter 11. We find that more than a third of individual chapter 11 debtors confirm a plan and avoid dismissal or conversion for at least 881 days, and that this rate is higher for jointly filed cases, cases filed by experienced attorneys and cases with substantial real estate. The rate is lower in cases filed pro se and cases in which the debtor does not expect to distribute assets to general creditors. We further find that involuntary chapter 11 cases are almost non-existent; the fear of involuntary servitude through bankruptcy is more of a theoretical than an empirical problem