Types Of Bankruptcy
Types of Bankruptcy – Which One?
The most important fact to consider in filing for a bankruptcy case successfully is to consider all types of bankruptcy in order to determine which one suits your financial conditions best. Accordingly, the Bankruptcy Code has enacted a total of six types of bankruptcy, each one are named and called after chapter numbers and their specific distinctive qualities. The chapters and names or titles of each of the types of bankruptcy are as follows: Chapter 7, entitled Liquidation, Chapter 13, entitled Adjustment of Debts of an Individual with Regular Income, Chapter 11, entitled Reorganization, Chapter 12, entitled Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income, Chapter 9, entitled Adjustment of Debts of a Municipality, provides essentially for reorganization, and Chapter 15, entitled Ancillary and Other Cross-Border Cases.
Types of Bankruptcy
Chapter 7, Liquidation, provides for ‘liquidation', specifically the sale of an individual debtor's non-exempt properties and the distribution of its proceeds to his creditors.
Chapter 13, Adjustment of Debts of an Individual with Regular Income, provides for adjustment of debts of an individual with regular income by allowing the debtor to keep his property and pay his debts over time, usually three to five years.
Chapter 11, Reorganization, provides for reorganization, usually involving a corporation or partnership, wherein the debtor usually proposes a plan of reorganization to keep its business alive and pay his creditors over time if not to seek relief.
Chapter 12, Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income, provides, as with Chapter 13, for adjustment of debts of a ‘family farmer' or a ‘family fisherman' as those terms (example income and family size) are defined in the Bankruptcy Code, while allowing a family farmer or fisherman to continue to operate the business while the payment plan is being carried out.
Chapter 9, Adjustment of Debts of a Municipality, provides, as with Chapter 11, for reorganization of municipalities including cities and towns, and also villages, counties, taxing districts, municipal utilities, and school districts.
Chapter 15, Ancillary and Other Cross-Border Cases, a new chapter added to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, provides necessary measures dealing with cases of cross-border insolvency. This is the US adoption of the UN Model Law on Cross-Border Insolvency coordinated with the other countries' interpretation to promote a uniform and equivalent legal action for cross-border bankruptcy insolvency.
Among the six types of bankruptcy, the most commonly filed ones are the personal bankruptcies Chapter 7 and Chapter 13, and also Chapter 11 bankruptcy – cases filed by individual consumers or business partnerships or corporations facing financial debts.
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