Bankruptcy Chapter Types
Types of Bankruptcy Chapters?
The Federal Bankruptcy Code provides four types of bankruptcy chapters for filing.
Chapter 7 – Provides for your debts to liquidated
Chapter 11 – Provides for a business to reorganize their debts
Chapter 12 – Provides for Family Farmers with Regular Income
Chapter 13 – Provides for Individuals to reorganize their debts
To file any of these bankruptcy chapters you must first look at your personal of business situation. The most commonly used bankruptcy filing is Chapter 7 bankruptcy as this eliminates the majority of the debts.
The reason why chapter 7 is so popular is because the debtor’s assets are sold to provide access to instant cash for the bankruptcy trustee to pay as much of the debts to the creditors.
Chapter 11 is commonly used by corporate businesses, however in some instances can be used by individuals. This involves the business owner keep control the running of the business but must sell it assets to pays it’s creditors. Once the business has sold their assets it must then reorganize the business to start a fresh. All rights and interest that the owner had with the original business now cease to exist and must form new ones.
Chapter 12 is exclusively for family farmers who are still running their business but are unable to meet their debts with the annual income that is coming in to the business. Family farmers are affectively requesting relief from the courts on the enormous debts that the business normally has.
Chapter 13 provides for individuals that do not meet the means test of Chapter 7, but who are still struggling financially. The individual is normally still working or has some sort of income, which they can use to repay some of their debt. A repayment plan will be drawn up to show how much they will pay on a monthly basis and for how long.
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