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The Supreme Court in Toibb v. Radloff, clearly established the right of an individual debtor not engaged in business to file for relief under Chapter 11. The individual debtor in that case was no longer working, but sought to convert his Chapter 7 petition to Chapter 11 to avoid liquidation of his shares of stock in a private company. The Court found that a concern about an involuntary Chapter 11 case being used to force the debtor to work for creditors in violation of the Thirteenth Amendment's involuntary servitude prohibition was unfounded "because there is no comparable provision in Chapter 11 requiring a debtor to pay future wages to a creditor . . .."
Since that opinion, however, Congress enacted the 2005 Amendments effective for all cases filed after October 16, 2005. The most dramatic changes to Chapter 11 by the 2005 Amendments were the amendments affecting Chapter 11 individuals. By amending six sections in Chapter 11, one of which added future wages to be property of the estate, Congress has created a means upon which an individual may be forced to work for creditors. It remains to be seen whether the Supreme Court will determine that it is a violation of the Thirteenth Amendment's involuntary servitude prohibition for a creditor plan to be confirmed over the debtor's objection under the Chapter 11 provisions added by the 2005 Amendments.
Section 1115 was added to provide that in addition to the property of the estate specified in § 541, property of the estate for individual debtors under Chapter 11 shall include all property that the debtor acquires after the commencement of the case and all earnings from post-petition services performed by the debtor.
Section 1123(a)(8) was added to allow a plan to provide for the payment of creditors through post-petition earnings from personal services performed by the debtor. As it relates to individuals, this provision overrules the Supreme Court decision in In re Ahlers, 108
S. Ct. 963 (1988), which stated that the new value exception, if it exists at all, could not be satisfied by the contribution of post-confirmation personal services ("sweat equity") that a farmer may contribute in growing crops.
Section 1129(a)(15) was added to permit confirmation of a plan notwithstanding the objection of an allowed unsecured claim so long as the individual debtor pays either property valued as of the effective date of the plan in an amount equal to the creditor's allowed unsecured claim or the debtor distributes an amount equal to or greater than
