The 4 Chapters of Bankruptcy
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photo by steed media service |
Bankruptcy has become an ever-increasing reality for many Americans. But what exactly is
bankruptcy and how does it apply to you? Here are the four types of
individual and corporate bankruptcies (Chapters 9 and 15 are meant for
municipalities and jurisdictions, respectively) and how they apply. –todd williams
Chapter 7:
Available to individuals and business debtors, option governs the
process of liquidation under the bankruptcy laws of the United States.
It is the most common form of bankruptcy in the U.S. and requires a
debtor to give up property that exceeds certain limits called
exemptions, so that the property may be sold to pay creditors. For a
corporation or partnership, there is no bankruptcy discharge when
filing Chapter 7. Instead, when the corporation or partnership is
dissolved and all assets of the corporate or partnership debtor have
been fully administered, the case is closed.
Chapter 11:
Businesses and individual debtors whose debts are very large use this
process. In most Chapter 11 cases, the debtor remains in control of its
business operations as a debtor in possession, and is subject to the
oversight and jurisdiction of the court.
Chapter 12:
This section of the Bankruptcy Code is only available to family farmers
and fishermen. Under chapter 12, debtors propose a repayment plan to
make installments to creditors over a period of three to five years.
Generally, the plan must provide for payment in three years, unless the
court approves a longer period.
Chapter 13:
This bankruptcy claim is on the rise nationally and governs debt
adjustment, requires a debtor to file a plan to pay debts (or portions
of debt) from current income. Supervised by a federal bankruptcy court,
it provides a reorganization process for the majority of private
individuals with unsecured debts of less than $336,900.00 and secured
debts of less than $1,010,650.00 (as of April 1, 2007).
