The bankruptcy laws are contained in Title 11 of the U.S. Code. There are several options for filing bankruptcy. Out of the types of bankruptcy, the most common are Chapters 7 and 13. The other Chapters are for specific entities.
- Chapter 7 bankruptcy is for individuals, but businesses may also file under Chapter 7. Chapter 7 wipes out most debt. Generally, all of the assets are sold and the money is used to pay off the creditors.
- Chapter 13 bankruptcy is generally for individuals. Chapter 13 allows the debtor to keep certain parts of his or her estate (such as one house and one vehicle) and is a re-organization of debt. The trustee assigned to the case reviews the debtor’s financial affidavit and sets up a payment plan. The debtor pays the payments to the bankruptcy court. The court then pays the creditors a portion of what they are owed.
- Chapter 11 bankruptcy is generally used for businesses that want to reorganize. Chapter 11 allows a company to keep its doors open so it can continue to do business.
- Chapter 9 bankruptcy is used for the adjustment of debts of a municipality. Individual debtors do not file under Chapter 9.
- Chapter 12 bankruptcy is used for the adjustment of debts of a family farmer or fisherman with a regular annual income.
- Chapter 15 bankruptcy is used for ancillary and cross-border bankruptcies.
The free
Bankruptcy Worksheet
is a good place to start for anyone considering the legal issues
surrounding personal or business bankruptcy. You can also
find a bankruptcy lawyer today to help you with credit and bankruptcy legal information, including the types of bankruptcy that will be the best fit for your situation.