Chapter 11 Filings By Wealthy Families Jump 73%; Real Estate Blamed
Chapter 11 bankruptcy filings by wealthy families jumped 73 percent in the second quarter of 2009, compared to a year earlier, and the dismal real estate market may be a big part of the reason why.
Like their less well-to-do counterparts, those counted in the National Bankruptcy Research Center statistics can’t afford to pay their mortgage—or mortgages—and can’t sell the house either, Chicago practitioner Joseph Baldi tells Bloomberg.
Meanwhile, for those with substantial assets, getting out of the financial mess they’re in isn’t as easy as it is for those with lesser holdings. They may be forced to file a Chapter 11 bankruptcy, which costs perhaps $15,000 to $30,000 in attorney fees and can include multiple contested hearings as assets are gradually liquidated and creditors battle over the proceeds. By contrast, a simple Chapter 7 generally requires only a single hearing and costs perhaps $1,300 to $6,000 in attorney fees as individuals and families who earn much less and are in way over their heads simply eliminate much or even all of their debt and start over.
Those with less than $1,010,650 in secured debt and $336,900 in unsecured debt may file a Chapter 13 bankruptcy instead of a Chapter 7, in order to get the court’s help in reorganizing their debt to stay afloat. However, those with more assets have to pursue the Chapter 11 option, under which they are treated more like a business, according to Bloomberg.
“They’re locked out of Chapter 7, because they make a lot of money, and it’s a disaster,” says attorney Jason Green, who practices in Washington, D.C., of the well-to-do who are losing their shirts. “They’re in a netherworld, just hanging out there.”
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