"I just went to a seminar advertised to the general public, and the speakers seemed really smart, and they said if I filed a personal Chapter 11, I could force the secured creditors to negotiate with me! Let's file today!"
Well. Uh.
No.
I periodically talk to really smart people who have a new religion; the belief in an all-powerful, all-benevolent personal Chapter 11 Bankruptcy, which will permit an individual to manifest an all-powerful ability to force both secured creditors and unsecured creditors to negotiate!
Well, I have an actual religion.
AND The Religion of the Personal Chapter 11 With No Name is a false religion, because...where to begin?
In the first place, as you'd say if you were using the Roman system of mnemonics, there's this issue: who is your lawyer representing in your personal Chapter 11 Bankruptcy?
It sure ain't you!
What, you say, astonishment written all over your face?
Yeah, your lawyer, the guy you paid to represent you, answers to a higher authority: he represents the estate, not you, if you have filed a personal Chapter 11 case!
And you have a fiduciary duty to do the same thing, and put the interests of your creditors ahead of your own!
Does that sound like a job description that makes sense for you personally? If it involves, say, not feeding your children? For instance? If this sounds like a good idea, you go, boy!
We'll talk more about this, but Nancy Rapoport, who is far smarter than I am, has said it far better than I could:
Representing a corporation can present numerous problems for Estate Counsel, but representing individual Debtors in chapter 11 is even trickier: "The complex fiduciary duties of a chapter 11 debtor-in-possession and its counsel can become even more confused when the debtor(s)-in-possession are individuals." Obviously, there is the metaphysical challenge of realizing that the human who hired you to file his chapter 11 petition is not your client in the bankruptcy case. Even though it's fairly easy, at least in theory, to understand that the president of a corporation or the managing partner of a partnership is not your client when you are representing the business entity itself, it stretches the bounds of legal fiction to comprehend the difference between the Bankruptcy Estate of an individual (your client) and the individual himself (not your client).
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So let's think about this first reason that it's an odd decision to file a personal Chapter 11: you ain't the client!
We'll back over this one with the '54 DeSoto in the future, but this is only the first reason that it may make little good sense to use this tool in the bankruptcy toolbox with great frequency.
And, by the way, does it make the slightest sense to consider dancing in and around an area of law that requires the use of the word "metaphysical"?
p.s. You do know that a not-unusual initial retainer for any Chapter 11, assuming that your lawyer knows where the Bankruptcy Court in Arizona is located, is going to start at $25,000? If the case is really, really simple? Just checking!
p.p.s. Recently I had a lovely discussion with a guy who had gone through a personal Chapter 11 Bankruptcy. The case was highly successful. It was confirmed by the Court, which is pretty unusual for any Chapter 11 case! The guy had been billed more than half a million dollars in legal fees, and it was unclear to me whether he was, in general, a happy camper as to his personal bankruptcy experience.
But if you want me to file a personal Chapter 11 Bankruptcy for you, I'll be happy to do so; I've filed 'em, and gotten them confirmed. But it's gonna cost you an arm and two legs, and the level of predictability in them is not as high as you might like. I think there are probably going to be better tools in the bankruptcy toolbox for you, but of course that depends on your specific facts.
Well. Uh.
No.
I periodically talk to really smart people who have a new religion; the belief in an all-powerful, all-benevolent personal Chapter 11 Bankruptcy, which will permit an individual to manifest an all-powerful ability to force both secured creditors and unsecured creditors to negotiate!
Well, I have an actual religion.
AND The Religion of the Personal Chapter 11 With No Name is a false religion, because...where to begin?
In the first place, as you'd say if you were using the Roman system of mnemonics, there's this issue: who is your lawyer representing in your personal Chapter 11 Bankruptcy?
It sure ain't you!
What, you say, astonishment written all over your face?
Yeah, your lawyer, the guy you paid to represent you, answers to a higher authority: he represents the estate, not you, if you have filed a personal Chapter 11 case!
And you have a fiduciary duty to do the same thing, and put the interests of your creditors ahead of your own!
Does that sound like a job description that makes sense for you personally? If it involves, say, not feeding your children? For instance? If this sounds like a good idea, you go, boy!
We'll talk more about this, but Nancy Rapoport, who is far smarter than I am, has said it far better than I could:
Representing a corporation can present numerous problems for Estate Counsel, but representing individual Debtors in chapter 11 is even trickier: "The complex fiduciary duties of a chapter 11 debtor-in-possession and its counsel can become even more confused when the debtor(s)-in-possession are individuals." Obviously, there is the metaphysical challenge of realizing that the human who hired you to file his chapter 11 petition is not your client in the bankruptcy case. Even though it's fairly easy, at least in theory, to understand that the president of a corporation or the managing partner of a partnership is not your client when you are representing the business entity itself, it stretches the bounds of legal fiction to comprehend the difference between the Bankruptcy Estate of an individual (your client) and the individual himself (not your client).
------------------------------------------------------------------------------------
So let's think about this first reason that it's an odd decision to file a personal Chapter 11: you ain't the client!
We'll back over this one with the '54 DeSoto in the future, but this is only the first reason that it may make little good sense to use this tool in the bankruptcy toolbox with great frequency.
And, by the way, does it make the slightest sense to consider dancing in and around an area of law that requires the use of the word "metaphysical"?
p.s. You do know that a not-unusual initial retainer for any Chapter 11, assuming that your lawyer knows where the Bankruptcy Court in Arizona is located, is going to start at $25,000? If the case is really, really simple? Just checking!
p.p.s. Recently I had a lovely discussion with a guy who had gone through a personal Chapter 11 Bankruptcy. The case was highly successful. It was confirmed by the Court, which is pretty unusual for any Chapter 11 case! The guy had been billed more than half a million dollars in legal fees, and it was unclear to me whether he was, in general, a happy camper as to his personal bankruptcy experience.
But if you want me to file a personal Chapter 11 Bankruptcy for you, I'll be happy to do so; I've filed 'em, and gotten them confirmed. But it's gonna cost you an arm and two legs, and the level of predictability in them is not as high as you might like. I think there are probably going to be better tools in the bankruptcy toolbox for you, but of course that depends on your specific facts.
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