Bankruptcy is a legally-defined process by which an individual or a business declares the lack of financial resources to pay off their debts. In the United States, bankruptcy is formally declared through a petition that is filed with a U.S. Bankruptcy Court. After the initial filing, the individual or business must follow a set of procedures that vary somewhat depending on the exact nature of bankruptcy that is filed. There are four major bankruptcy types that are currently recognized by Bankruptcy Courts.
To understand more about bankruptcy types and to learn which bankruptcy filing is the best choice in your situation, it is advisable to consult with an experience bankruptcy professional. There are four major bankruptcy types that are currently recognized by Bankruptcy Courts.
Chapter 7 bankruptcy, also known as a liquidation bankruptcy, provides for the liquidation of an individual's or business' assets. In a Chapter 7 bankruptcy proceeding, the debtor is allowed to retain a few certain types of assets, but their remaining assets are sold and the proceeds are used to pay their creditors. Some debts, such as credit card debt, may be fully discharged, but other debts, including child support and alimony, are most often retained. Chapter 7 bankruptcy is one of the most common types of bankruptcy in the U.S.
» read more about Chapter 7 Bankruptcy »Chapter 13 is another of the more frequently-used bankruptcy types. Also known as a "wage earner's bankruptcy," Chapter 13 allows an individual with a regular source of income to establish a plan for the repayment of their debts. A major advantage of Chapter 13 bankruptcy over several other bankruptcy types is that the individual is allowed to keep their personal property. Repayment of debt is generally made over the course of a three- to five-year period under this type of bankruptcy.
» read more about Chapter 13 Bankruptcy »Chapter 11 bankruptcy, nicknamed the "reorganization bankruptcy," can be declared by both individuals and businesses but is most often used by businesses. Individuals are much more likely to file for bankruptcy under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. Of all of the bankruptcy types, Chapter 11 bankruptcies are more likely to be in the news, since many well-known companies have resorted to this method in times of severe financial distress. Debtors who file under Chapter 11 are allowed up to 120 days to formulate a reorganization plan that specifies exactly when and how much the debtor's creditors are to be repaid. The creditors have the right to approve this plan, but there are often obstacles to obtaining the approval necessary for the plan's execution.
» read more about Chapter 11 Bankruptcy »In a Chapter 12 bankruptcy, family farmers and family fishermen are allowed to reorganize to settle their debts to their creditors. As the income from these occupations is most often seasonal, Chapter 13 bankruptcy was often not a good option, so Chapter 12 bankruptcy was established in 1986 to recognize this difference. As with other bankruptcy types, a Chapter 12 proceeding starts when the farmer or fisherman files a petition, after which they have 90 days to create and file a plan for the repayment of their debts. Certain income criteria must be met in order to file for this type of bankruptcy; the total debts owed must not exceed $3,544,525, and 50% of the debtors' gross income from the year prior to filing the petition must have originated with the farming or fishing business.
» read more about Chapter 12 Bankruptcy »