Arizona experienced a 22 percent decline in bankruptcy filings in 2012 from a year earlier, and Chapter 11 bankruptcies increased 14.5 percent in 2012. Individuals and not businesses accounted for more than half of the Chapter 11 filings. This is somewhat unusual because most people filing a personal bankruptcy file either a Chapter 7 or a Chapter 13.


Businesses filing for Chapter 11 bankruptcy usually do so to emerge from bankruptcy under a creditor-approved plan to repay debt and continue operations. Individuals normally rely upon a Chapter 13 bankruptcy means to obtain debt relief through a court-approved plan with manageable payments toward outstanding debt.


Unlike a Chapter 7 bankruptcy, a Chapter 13 bankruptcy allows an individual to retain assets, but the amount of debt a person may claim in a Chapter 13 is about $1 million in secured debt and $370,000 in unsecured debt. Secured debt would include mortgages on real estate. Common unsecured obligations include credit card debt and medical expenses.


The increase in Chapter 11 bankruptcy filings by individuals could be attributed, in part, to people owning multiple properties that were financed with loans secured by mortgages. Chapter 11 bankruptcy allows an individual to restructure debt in much the same way a business reorganization allows a business owner to renegotiate debt, leases and other obligations to achieve a fresh financial start.


A consumer who is overwhelmed by financial challenges brought on by unexpected life changes, unemployment or the effects of a struggling economy can seek the assistance of a bankruptcy attorney to explore possible solutions. As the number of individuals filing Chapter 11 bankruptcy shows, personal bankruptcy options are not limited to Chapter 7 bankruptcy or Chapter 13 bankruptcy. A bankruptcy attorney can help a person review the benefits of each type of bankruptcy and determine which is based for them.


Source: Arizona Daily Star, “AZ bankruptcy filings decline more than 22%,” Dave Wichner, Jan. 13, 2013