Many people hear the word Bankruptcy and immediately have a picture in their minds of what that means. In fact, there are several different kinds of bankruptcy, called chapters.
Chapter 7 is the most common type of bankruptcy and it is usually what everyone imagines when they first think about bankruptcy. This is also known as a Straight Bankruptcy or Liquidation Bankruptcy. If you have a lot of debt, but very little income and few assets, then Chapter 7 is probably going to be the best option for you.
Chapter 13 is the next most common type of bankruptcy. Chapter 13 is a Reorganization Bankruptcy, common called a “wage earner plan” or a “debt consolidation plan.” Chapter 13 bundles all your debts into one pot and allows you to pay all or a portion of them back over the course of 3 to 5 years. So long as you follow the plan set up by the court, you’ll be protected from collection attempts by your creditors. If you have a regular income or have assets you want to protect, consider filing a Chapter 13 case.
Chapter 9 is very rare. Chapter 9 bankruptcies are for cities or municipalities that need to file bankruptcy. Individuals would not qualify for a Chapter 9.
Chapter 11 is another type of reorganization bankruptcy like Chapter 13. However, Chapter 11 cases are usually filed by businesses or corporations. Chapter 11 cases allow for the reorganization of large amounts of debts and assets. Chapter 11 also usually leaves the business in control of its own funds and resources so it has more options when it comes to reorganizing.
Chapter 12 cases are specifically designed for family farmers or fishermen. It contains different provisions and procedures that take into account the irregular nature of the income of a farmer or fisherman.
Chapter 15 cases are for foreign entities. This usually will apply to business and not individuals. In some situations foreign companies that do business in the US will seek to file bankruptcy here. Chapter 15 deals with how they are allowed to petition US courts and how the courts here will cooperate with foreign courts to administer the case.
Naturally, the descriptions here are very basic overviews of the Chapters of the Bankruptcy Code. At Bond & Botes, we offer free consultations with our experienced attorneys. We will discuss your case in depth with you to help you decide if bankruptcy is the right financial decision for you. If you have been thinking about bankruptcy but aren’t sure if you need to file, I urge you to call one of our affiliated offices to set up a consultation.