Types Of Bankruptcies

Bankruptcy is a court procedure that allows debtors to get rid or discharge debt and repay creditors. While there are two main categories of bankruptcy for the average person: Chapter 7 and Chapter 13, there are several other types of bankruptcies such as the Chapter 9, 11, 12, and 15 that are less common. In this article we’ll take a look at each and discuss the implications of each type.

 

Chapter 13 Bankruptcy

The Chapter 13 bankruptcy’s focus is to set up a payment plan through the courts, which is overseen by a bankruptcy trustee assigned to your case. Individuals who file for this type of bankruptcy pay the trustee and the trustee in turn pays the creditors. The payment plan must be reviewed and approved by the bankruptcy court and trustee in advance and will typically be in within a 3 to 5 year time-frame.

 

In order to find your payment amount, the court takes into account your total debt, the amount of unsecured loans, and how much your income is. There is a limit on the amount of debt you have in order to qualify, but as long as you do, Chapter 13 bankruptcy is an excellent way to get caught up on your debt payments while retaining your property and possessions.

 

Chapter 7 Bankruptcy

By far and large the most common kind of bankruptcy is the Chapter 7 bankruptcy protection. Just as in the Chapter 13, you must be able to show you are eligible for a Chapter 7 bankruptcy and the amount you earn is significantly less than in a Chapter 13. Chapter 7 bankruptcies are sometime referred to as “liquidation bankruptcies” as your property will be accounted for and sold off by the bankruptcy trustee in order to satisfy your creditors.

 

Also, there exemptions available to individuals under Chapter 7 bankruptcy that will be excluded from sale in the course of the bankruptcy liquidation. These exemptions fall under federal guidelines, but depending on your state, you may be afforded different and/or additional exemptions.

 

Chapter 9 Bankruptcy

A Chapter 9 bankruptcy is one specifically reserved for municipalities that need to reorganize their debt. Usually when a town or city needs to reorganize its debts, this comes in the form of extending debt maturities or refinancing debt. Typically, the bankruptcies court role in a Chapter 9 bankruptcy is to confirm the debt adjustment plan and ensure implementation. Recent notable Chapter 9s have been Jefferson County Alabama, Orange County, California, and Detroit Michigan.

 

Chapter 11 Bankruptcy

Chapter 11 bankruptcies are the third most common behind 7 and 13 and involve the restructuring the debt by businesses or in some cases high net worth individuals. The alternative name for Chapter 11 bankruptcies is a “reorganization” bankruptcy, as it is used to reorganize a corporation, sole proprietorship, or partnership. A Chapter 11 bankruptcy is similar to a Chapter 13 in that the trustee is very involved in the administration of the case, and monitors the operation of the business including operating reports and fees.

 

Chapter 12 Bankruptcy

A Chapter 12 bankruptcy is reserved for farmers and fisherman. Also similar to a Chapter 13 bankruptcy, a family farmer or fisherman with steady income can apply for a Chapter 13 bankruptcy to forma repayment plan that usually spans of 3 to 5 years. Chapter 12 bankruptcies are often faster, less complicated, and less expensive than a chapter 11 bankruptcy.

 

Chapter 15 Bankruptcy

Probably the rarest type of bankruptcy is the Chapter 15 bankruptcy, which is reserve for debtors who have domestic and international debts and assets. Usually, a Chapter 15 bankruptcy is petitioned for as a support mechanism for a bankruptcy proceeding brought in another country (usually the debtors home country). Alternatively the debtor can commence a full Chapter 7 or 11 case in the US if the situation is especially complex.

 

The Right Bankruptcy for You

What you earn, how you earn it, how much debt you have, where you live, the amount of assets you have, even how much money you will inherit all play a part in which type of bankruptcy, if any, you should file. With the amount of legal code, in addition to, the stakes involved, you should always consult a Sacramento bankruptcy attorney before pursuing legal debt relief through the US government. Costly mistakes could very well be avoided, ensuring you get the second chance at a healthy financial future you deserve.