Most people across the globe are familiar with the word bankruptcy. This process is handled in federal court, and helps someone eradicate debts or make plans to repay it in an affordable way. There are six bankruptcy chapters, including Chapter 7, Chapter 12, Chapter 9, Chapter 11, Chapter 15, and Chapter 13. There are several chapters that can be filed based on the debtor’s circumstances and debts. As a chapter 7 bankruptcy lawyer explains, here are the bankruptcy chapters listed and described in further detail.
Sometimes called “liquidation bankruptcy”, Chapter 7 is the most commonly filed bankruptcy chapter in the United States. It provides the debtor with the opportunity to liquidate their property and then use those funds to distribute to creditors. Individuals are permitted to keep property that is exempt from liquidation.
Businesses that file for Chapter 7 may be given a trustee who oversees the bankruptcy case and business operations for a period of time by handling the discharge of liquidated assets and other procedures.
This chapter is helpful and designed for family fishermen or family farmers who have encountered immense financial distress. Through Chapter 12, the individual in debt devises a plan to repay their creditors over a duration of 3-5 years.
Designed for municipalities (towns, cities, school districts, and counties), Chapter 9 provides protection from creditors as the entity creates a plan for adjusting their debts. An example of a municipality that filed for this chapter is the city of Detroit, who became the largest American city in history to file for bankruptcy.
Otherwise referred to as “reorganization bankruptcy”, Chapter 11 is available to both businesses and individuals. By comparison to Chapter 7, a debtor stays in control of their business operations and does not have to sell off its assets. Chapter 11 allows a company to get out of bankruptcy and continue on as a healthy business. A business owner can negotiate to change the terms on debts, such as values of payments and interest rates.
This bankruptcy chapter offers a path for dealing with cases that involve multiple countries. The intention of Chapter 15 is to provide collaboration and cooperation between the United States bankruptcy courts, a foreign debtor, and foreign courts. A foreign debtor with assets in more than one country would file for Chapter 15.
Chapter 13 bankruptcy is called a “wage earner plan”, where an individual with reliable income is permitted to establish a repayment plan that pays back in part or entirety of their debts. A benefit of Chapter 13 is that it gives individuals the chance to prevent foreclosure on their home (which is contrast to Chapter 7).
Before filing for bankruptcy, it’s wise to consult with a legal team, similar to the lawyers at Therman Law Offices, LTD, to make sure that the next steps you take and which bankruptcy chapter you file for would be in your best interest. Now that you have read about the six bankruptcy chapters to choose from, you can move forward towards better financial stability.