Bankruptcy Soars Among Wealthy

More wealthy families are seeking bankruptcy, and they're taking a harder road through the process than those of lesser means.

Bloomberg reports that wealthy individuals' Chapter 11 filings increased 73 percent in the second quarter from the year before. These are individuals with at least $1,010,650 in secured debt and $336,900 in unsecured debt.

And the rich aren't like you and me. They're trip through bankruptcy court under Chapter 11 is more complex than the Chapter 7 liquidation process used by most people who file for personal bankruptcy.

Under Chapter 7, debts can be completely discharged. But Chapter 11 gives time for an individual to reorganize finances and repay debts. And while Chapter 7 filings can be disposed of in a single hearing, Chapter 11 may mean multiple steps, and each can be contested.

The cost of a Chapter 7 case runs $1,300 to $6,000 in legal fees, while a Chapter 11 case starts at $15,000 and climbs from there.

And there are large homes to deal with, multiple car payments, children in private school.

"You're living on the edge, you're juggling all those financial balls" Leslie Linfield of the Institute for Financial Literacy told Bloomberg. "When one ball goes, they all fall down."

Blame for the bankruptcy balloon among the wealthy can largely be attributed to the real estate collapse. Zillow.com says listings for homes for sale worth $1 million or more increased 27.3 percent in July from October. But sales of homes worth $1 million to $2 million fell 23 percent in July compared to last year.

Joseph Baldi, a Chicago bankruptcy attorney, said, "There are a lot of people with real estate, and they can't afford it. They can't make the payments, and they can't sell the house."