Now that said, it seems ridiculous that the bankruptcy court is letting him do all that spending.
Indeed, it's a moral outrage.
Exactly. I would think they would freeze his assets and give him an allowance to live on.
That's exactly what happens. The difference between Chapters 7 and 11 are how the estate assets are managed. In Chapter 7, all* the debtor assets are liquidated and thrown into a big pile. Creditors submit arguments to the court explaining why they should get a bigger dip out of the pile than others. The court makes an equitable judgment in which some creditors may be fully paid off, others may be partly paid off, and some creditors just go fish.
Morally this works because the debtor admits he has thrown in the towel and has to start over from basically nothing—but can do so debt-free. Creditors go for it because it changes the footing from creditor vs. debtor (can't squeeze blood from a turnip) to creditor vs. creditor. The money is there (whereas before a creditor couldn't, say, force a debtor to sell his house or do any other specific thing). All you have to do is out-lawyer your competitors and you get more pennies on your dollar.
Chapter 11 is a
reorganization of assets and debts. It differs fundamentally in that the assets remain in place initially. A court-appointed trustee oversees assets and expenditures. The debtor is responsible for making a plan to restructure debts and assets, which may involve
voluntary liquidation of some assets (while retaining others) and a request that the court erase or lower some debts (while retaining others), modifying the terms of repayment, or specifying a negotiation between debtors and creditors to seek amicable settlement of debt.
The debtor is also responsible for convincing the trustee of ongoing expenditures necessary to maintain the debtor entity as an ongoing concern with a plausible prospect of regaining solvency. The goals are (1) to keep the entity operating insofar as possible during the process, and (2) do the best for the creditors with the least harm to the debtor.
While the court must ultimately approve the reorganization plan, this footing still gives quite a lot of power to the debtor over Chapter 7. And the trusteeship plan is generally agreed to early so that the debtor entity can achieve stability in order to spend more time on the reorganization plan. Hence its terms are not always favorable to a broader theory of morality or equity. The trustee can even incur more debt if they believe it will result in an overall better reorganization outcome and keep the entity afloat while it restructures. And Jones can certainly hire lawyers and accountants to justify that an ongoing personal expenditure of $93,000 for his household is in everyone's best interests. And yes, punitive judgments are more dischargeable under Chapter 11.
Ya know, if Jones can't maintain his signature lifestyle, how is he going to keep public interest in him enough to make money as a public figure? (shudder!)
There is also Chapter 13 bankruptcy (limited to individuals), but I'm not smart enough to talk about it.
But yes, it's all rich-person law and economincs. The morality underneath Chapter 11 is the presumption that the debtor who can afford to go broke this way is honorable and conscientious, and that there is a greater social benefit in letting large, complex financial structures (even if it's just one person) repent of their errors with as little blood drawn as possible. It's a moral outrage that someone like Jones should be able to draw on this.
...he's just going to spend all his money before any of his debts get paid.
That's often the plan.
* With austere exceptions for very basic living necessities:
some place to live,
some car, etc. If you file for Chapter 7 bankruptcy, they will liquidate your Rolls Royce, but perhaps let you keep some of the proceeds to buy a used Subaru.
