Home -> Law Blog Directory -> Bankruptcy Blogs -> Arizona Bankruptcy Attorney Blog

Bankruptcy

: Arizona Bankruptcy Attorney Blog

A Chapter 11 is Forever. Wait, That's a Diamond!

By Joseph McDaniel, Esq.

One of the top ten questions that clients ask me is how long a Chapter 7 will take, from start to finish. Many are astonished to hear that a no-asset, ezee-peezee (by comparison with my other cases) Chapter 7 will take around a year, and if there are assets, four years is not uncommon.

Chapter 13 Cases, once they get an Order Confirming the Plan, which may take quite a while or may be quick as can be, come in two flavors as well: three years or five years, depending on whether you passed the Means Test.

When I get a Round Tuit, I need to check statistics to see how many folks who qualified for a Chapter 7 filed a Chapter 13 instead, locking themselves into indentured servitude for three years. The number can't be very large. Can it?

Then there are the Big Boys; the Chapter 11 Cases. A Chapter 11 doesn't just seem like it takes forever. Here's a discussion in Bloomberg of a case that, after a decade, looks like it may get to a Confirmation Order soon! But then it has to make it to consummation of the plan, and that's the part where many, many Chapter 11 Cases die. I don't expect that to happen to W. R. Grace and Co., but it happens to a lot of Chapter 11 Cases.

Now, the only reason this time difference is important in the consumer bankruptcy universe is that some folks don't meet the Means Test, and therefore cannot file a Chapter 7 (mind you, many enterprising potential debtors find a relationship with God a year before filing, and are able to contribute 15% of their gross income to their Church, and therefore knock 15% off their Means Test calculation, and thereby pass the Means Test!), and some folks have a debt level high enough that they do not qualify for a Chapter 13 (see 11 USC 109).

Those folks may be consigned to a particularly stressful portion of Bankruptcy Hell; the Personal Chapter 11 Case. And as you can see from the above, a Chapter 11 may spend more time in pre-confirmation than the life-span of a Chapter 7 and a Chapter 13 Bankruptcy, combined!

There are a lot of reasons I don't particularly favor a Chapter 11 for small to medium sized debtors; it takes a long time, and it costs a lot in legal and other professional fees. And while I've done personal Chapter 11 Cases, and gotten them confirmed and consummated, they weren't all that much fun for the debtors, although the results were ultimately satisfactory.

I talked to a nice guy a year ago who had just come out of a personal Chapter 11; he said he had been billed less than a million in legal fees, but more than a half million.

And he was less than overjoyed with the result he obtained for his dough; and I didn't blame him!

For that, he should also get egg roll!

Full post as published by Arizona Bankruptcy Attorney Blog on February 01, 2011 (boomark / email).