Tuesday, October 15, 2013

The Uprising of the Absolute Priority Rule in Individual Chapter 11 Cases

Way back in December of 2010 I wrote an article about the absolute priority rule ("APR") and the case In re Gelin out of the Middle District of Florida Orlando Division written by now Chief Judge Jennemann.  That case ultimately ruled that the APR did apply to individual Chapter 11 cases despite the underlying theme of the 2005 BAPCPA amendments to make it easier for an individual to file for reorganization as opposed to liquidation.

Up through 2012 courts throughout the United States were all over the place on deciding the issue of whether or not the APR applied in individual cases and no circuit courts had ruled on the issue.  Since 2012 we have seen a drastic change.  Three circuit courts and one BAP have weighed in on the issue and unfortunately most of them have ruled the APR does apply in individual Chapter 11 cases.

The 4th Circuit (In re Maharaj at 681 F.3d 558), the 10th Circuit ( In re Stephens at 704 F.3d 1279), and the 5th Circuit (In re Lively at 2013 WL 2347045) have all ruled that the APR does apply to individual Chapter 11 cases while the lone wolf ruling in the Debtor's favor is the 9th Circuit BAP (In re Friedman at 466 B.R. 471).

Currently in the 11th Circuit we do not have binding precedent (unless your particular judge has ruled on the issue).  That being said, it is coming!  So if you are in Florida, Georgia, or Alabama and are considering an individual Chapter 11 case, you should speak to someone now.

There are many other reasons for individuals to consider Chapter 11 bankruptcy when faced with tough financial times.  Please feel free to call (904) 354-5065 to setup a free consultation to consider your particular situation and options.  You may also email jason@jasonaburgess.com or for more information please visit www.chapter11jax.com

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