Types of Bankruptcy
CHAPTER 7:
Chapter 7 is the most common form of bankruptcy. Both businesses and individuals can file a Chapter 7 bankruptcy. Chapter 7 governs the process of liquidation under the bankruptcy law in which debtors' non-exempt assets, if any, are sold by the Chapter 7 trustee and the proceeds distributed to creditors according to the priorities established in the Bankruptcy Code. In most individual cases, all assets are exempt, and therefore debtors get to keep all of their real and personal property.
IN INDIVIDUAL CASES (CONSUMER CASES): debtors receive a discharge of personal liability for all pre-petition debts (with limited exceptions) in slightly over 90 days from the date of filing. The types of debts discharged include, but are not limited to,credit card bills, medical bills, judgments, some tax obligations (IRS debt), deficiencies, lines of credit, personal loans etc.
Upon filing, a Chapter 7 trustee is appointed to your case and any property of value that is not exempt by law is liquidated in order to pay your unsecured creditors. Most cases are "no asset" cases in which debtors gets to keep all of their property (including real estate, automobiles, retirement accounts, household goods and furnishings etc.).
IN BUSINESS CASES (NON-CONSUMER CASES) the business does not receive a discharge, instead the entity is terminated. Theoretically the debts of the business continue to exist until applicable statutory periods of limitations expire; however these debts are uncollectible because the business is not longer in existence.
Upon filing, a Chapter 7 Trustee is appointed to your case and all property of value is sold in order to pay unsecured creditors.
CHAPTER 9:
Chapter 9 of the Bankruptcy Code provides for reorganization of municipalities (which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts).
CHAPTER 11 (reorganization):
Both businesses and individuals can file a Chapter 11 bankruptcy, although it is most prominently used by businesses. Under Chapter 11, debtors may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or both.
Upon filing, the debtor goes about negotiating a plan of reorganization with their creditors. After negotiations, the debtor proposes a plan of reorganization (creditors also have the opportunity to submit competing plans). In the plan of reorganization, the debtor is able to restructure debts (reduce the amount due) and make payments over an agreed-upon length of time. The debtor may also be able to terminate certain burdensome contracts or leases.
Unlike Chapter 13, the Chapter 11 plan is put to a vote. If the plan is approved by the various classes of creditors and by the bankruptcy court the debtor will receive a discharge. The debtor is able to keep those assets which it wishes to retain. In most instances, the debtor is able to continue to operate its business and control its affairs.
CHAPTER 12:
Chapter 12 of the Bankruptcy Code provides for adjustment of debts of a "family farmer," or a "family fisherman" as those terms are defined in the Bankruptcy Code.
CHAPTER 13 (wage earners plan):
Only individuals with regular income can file a Chapter 13 bankruptcy. Chapter 13 provides a reorganization process for individuals. In chapter 13 cases, debtors get to keep all of their assets. Debtors can save their home from foreclosure by curing delinquent mortgage payments over time. Also, under certain circumstances, debtors can completely eliminate junior mortgages on their home.
In chapter 13 cases the debtor must submit to the court a Chapter 13 plan providing for the repayment of at least some of their debt in installment payments over a period of 3 to 5 years.
Once all plan payments are made, the debtor receives a discharge of personal liability for all pre-petition debts (with limited exceptions) including but not limited to credit card bills, medical bills, judgments, tax obligations, deficiencies, lines of credit, personal loans etc.
CHAPTER 15:
Chapter 15 of the Bankruptcy Code deals with cases of cross-border insolvency.