Chapter 11 Bankruptcies Decline in South Florida

How common is Chapter 11 bankruptcy in South Florida? According to a recent article in Miami Today, business bankruptcy filings, including Chapter 11, are on the decline. In order to understand the factors involved in this drop in filings—and whether it’s likely here to stay—it’s important to understand the basic kinds of bankruptcy and who files for each type.

Understanding Chapter 11 Bankruptcy

Chapter 11 bankruptcy looks similar to Chapter 13 bankruptcy in that it reorganizes debts and allows businesses to continue operating. However, Chapter 11 bankruptcy generally is limited to business entities and high-asset individuals.

As a reminder, there are three general types of bankruptcy: Chapter 7, Chapter 13, and Chapter 11. In a Chapter 7 bankruptcy filing, the individual or business liquidates assets and comes away with a “clean slate.” Given that Chapter 7 involves liquidation, when businesses file for this type of bankruptcy, the business typically will dissolve at the end of the process. What’s the difference between Chapter 13 and Chapter 11 bankruptcy, then? In most cases, Chapter 13 is used by individuals while Chapter 11 is used by businesses, including partnerships and corporations. In some cases, however, an individual person’s debts might exceed the permissible limits for a Chapter 13 bankruptcy. In such cases, these high net worth individuals will file for Chapter 11 bankruptcy.

Here’s a quick reference:

– Chapter 7: for individuals or business entities seeking to liquidate assets and emerge without debts.
– Chapter 13: for individuals who want to reorganize their debts (or who don’t qualify for Chapter 7), and will abide by a reorganization plan.
– Chapter 11: for businesses (and sometimes high-asset persons) who want to reorganize their debts and will abide by a reorganization plan.

Improving Economy in South Florida

Understanding a bit more about the types of bankruptcy and how they work can help us to think through the recent decline in Chapter 11 bankruptcy filings. According to the article in Miami Today, the primary reason that businesses haven’t been filing for bankruptcy—both Chapter 7 and Chapter 11—is that Florida has “an improving economy led by a solid real estate market and low interest rates.” To be sure, a number of analysts predict that the number of Chapter 11 filings will continue to decline.

As numerous analysts point out, “the main drivers of South Florida’s economy are the hospitality industry and real estate.” If those continue to do well, we should see a continued decline in filings. And the numbers prove the point. In other words, the reasons that businesses and individuals file for Chapter 11 bankruptcy—the need to liquidate assets in order to pay debts or to restructure debts—aren’t appearing as frequently.

According to data reported by the U.S. Bankruptcy Court for the Southern District of Florida, first-quarter Chapter 11 bankruptcy filings over the last several years have looked like this:

– 2015: 59 Chapter 11 filings;
– 2014: 87 Chapter 11 filings; and
– 2008-2010: 91 Chapter 11 filings.

In addition to a healthy economy, Chapter 11 filings also may be on the decline because “lenders, in particular, are exploring less costly and more efficient alternatives to a Chapter 11 restructuring.”

If you have questions or concerns about filing for Chapter 11 bankruptcy, you should be sure to discuss your case with an experienced Tampa bankruptcy attorney at Tampa Law Advocates, P.A. Bankruptcy law in Florida is extremely complicated, and you’ll need a dedicated advocate to guide you through this process.