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Introduction to the different forms of bankruptcy


Chapter 7, 9, 11, 12, 13, and 15 Bankruptcy Introduction

If you find yourself in a sea of debt that you simply can't seem to get out from under, you may be considering filing for bankruptcy. Before you make that final decision, it's critical that you understand the types of bankruptcy and what assets are protected under the bankruptcy laws. Most people are familiar with Chapter 7, Chapter 11 and Chapter 13, but there are lesser known options in Chapter 9, 12 and 15. We'll discuss the differences in each.

Chapter 7 Bankruptcy

To qualify for relief under Chapter 7 of the Bankruptcy Code, you may be an individual, a partnership, or a corporation or other business entity. It's important that you understand that Chapter 7 offers no reorganization plan, just a full out declaration. Conditions to be met vary from state to state and you need to be fully aware of your state's requirements before you decide this is the right method for you.

Chapter 7 Bankruptcy involves sale of non exempt assets to pay off your debts. Exemption of property varies depending on the statutes that apply in your state. Before you decide that Chapter 7 is the method you want to select, speak at length with a qualified Bankruptcy Attorney and discuss all of your options.

Chapter 9 Bankruptcy

Created in 1934 Chapter 9 is not for the everyday person. Chapter 9 of the Bankruptcy Code applies to Municipality Bankruptcy which helps cities, towns, counties and school districts reorganize. Familiarity with this is typically restricted to those who are actively involved in the government of their cities, towns, etc.

Chapter 11 Bankruptcy:

Chapter 11 Bankruptcy is generally used when a business is interested in restructuring their debt. Consumers usually avoid filing Chapter 11 due to (a) expense involved and (b) the complexity of the rules. When a business files for Chapter 11 they are allowed to continue normal business practices although this is done under the supervision of the Bankruptcy Court and generally a trustee of the Court.

Chapter 12 Bankruptcy

A little known part of the Bankruptcy code is Chapter 12. This was specifically designed for families who are farmers or fishers. The biggest difference in this chapter of the bankruptcy code is that all debts must be reorganized unless there are very special circumstances. Because Chapter 13 (discussed below) was really designed for wage earners with small debts, it's not always helpful to families who fish or farm as their sole source of income as these business owners also typically have significant investments in equipment usually resulting in significant debt.

Chapter 13 Bankruptcy
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Chapter 13 Bankruptcy

Chapter 13 of the US Bankruptcy Code is the most common used chapter for those who earn wages and feel that they have no alternative to get out from under their debt. This code allows for repayment of all debts when a filer has a regular income. While each state does have variations on this code (which should be carefully be reviewed by anyone considering filing), typically it allows for repayment of debts over a period of thirty six months and may be extended up to sixty months in certain cases.

Chapter 15 Bankruptcy

Chapter 15 of the US Bankruptcy Code is a newly imposed (2005) code that is meant to deal with those who have assets in foreign countries. This allows an individual (or company) who has filed for Chapter 7 or Chapter 11 to include assets and debts that might be held outside of the United States.

We have offered you a basic outline of the various chapters of the US Bankruptcy Code. Under no circumstances should this be considered legal advice. If you are considering filing for bankruptcy you are strongly encouraged to contact an attorney who specializes in bankruptcy.

Related topics: Bankruptcy Introduction, New Bankruptcy Laws, Life After Bankruptcy, What Bankruptcy Cannot Do




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