Different Types of Bankruptcies Explained
Most people in the United States have heard the term bankruptcy, bankruptcy which is often handled in the federal courts can help a person get rid of any debt they have or help them to make a repayment plan. However, do you know the differences between each of the different chapters of bankruptcy — there are six chapters of bankruptcy in the United States.
Those chapters are: Chapter 7, Chapter 9, Chapter 11, Chapter 12, Chapter 13 and Chapter 15, with Chapter 7 and Chapter 13 bankruptcy being the most common ones filed. Not every type of bankruptcy is going to apply to every situation, and yet there may be instances where more than one type of bankruptcy might apply to your situation.
Chapter 7 bankruptcy is often referred to as liquidation bulk bankruptcy and is the most common type of bankruptcy in the United States. It is also a basic form of bankruptcy. Chapter 7 provides liquidation of an individual’s property and then just distributes it to creditors. Individuals keep exempt property.
Chapter 9 bankruptcy is for cities, towns, counties and school districts. Municipalities that file for chapter 9 bankruptcy are protected from creditors for the developer print for adjusting their debts. In 2013, the city of Detroit filed for Chapter 9 bankruptcy and became the biggest city in the history of the United States to file for bankruptcy.
Chapter 11 bankruptcy is a reorganization bankruptcy and is available to individuals or businesses. In contrast to chapter 7 the debtor remains in control of business operations under Chapter 11 and does not sell off all of its assets. What Chapter 11 does allow business to come out of bankruptcy is a healthy business, and while under chapter 11 bankruptcy, businesses will attempt to change the terms of their debts, interest rates and more so that it is more affordable.
Chapter 12 is designed for family farmers and family fishermen who are under financial distress. Under Chapter 12, the person comes up with a plan to pay creditors over 3 to 5 years.
Chapter 13 is also called the wage earner plan, is when an individual that has regular income is allowed to develop a plan to pay back the debt in parts or all of their debts in entirety. Under Chapter 13, individuals are allowed to avoid foreclosure on their houses and do not have to worry about the property.
Chapter 15 bankruptcy was added to the United States bankruptcy code in 2005 and it provides a way for dealing with cases that involve more than one country. The main goal of chapter 15 is to provide cooperation between a foreign debtor, foreign courts and the United States bankruptcy courts. This is useful if the debtor had assets in a number of countries as they would just file chapter 15.