Bankruptcy

Lesson 3: Types of Bankruptcy

Explaining bankruptcy law fundamentals, key provisions of the Bankruptcy Code, and practical insights for effective filings.

In this lesson, we will dive into the various types of bankruptcy as outlined by the U.S. Bankruptcy Code. Understanding these differences is crucial for effective bankruptcy filings.

Chapter 7: Liquidation

Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves the sale of a debtor's non-exempt assets by a trustee. The proceeds are then used to pay off creditors. To learn more, visit our detailed article on Chapter 7: Liquidation.

Note: Not all assets are subject to liquidation. Certain exemptions apply. Refer to our lessons on Exemptions for more details. For a comprehensive understanding, you might want to check out Bankruptcy and Debtor/Creditor: Examples and Explanations on Amazon.

Chapter 11: Reorganization

Chapter 11 bankruptcy is primarily used by businesses to reorganize their debts while continuing operations. This chapter is also available to individuals with substantial debts. For more information, see our article on Chapter 11: Reorganization.

Chapter 13: Wage Earner's Plan

Chapter 13 bankruptcy allows individuals with regular income to develop a plan to repay part or all of their debts over three to five years. This type of bankruptcy can help save a home from foreclosure. Further details can be found in our lesson on Chapter 13: Wage Earner's Plan.

Chapter 13 Repayment Plan Flowchart

graph TD; A["Filing of Chapter 13 Petition"] --> B["Meeting of Creditors (341 Meeting)"]; B --> C["Confirmation Hearing"]; C --> D["Implementation of Repayment Plan"]; D --> E["Discharge of Debts"];

Chapter 9: Municipalities

Chapter 9 bankruptcy provides for reorganization of municipalities, including cities and towns. It allows for the restructuring of debts without the liquidation of assets. Learn more in our article on Chapter 9: Municipalities. For an in-depth read, consider Bankruptcy Nutshell (Nutshells) on Amazon.

Chapter 12: Family Farmers and Fishermen

Chapter 12 bankruptcy is tailored for family farmers and fishermen. It allows them to propose and carry out a plan to repay their debts. Read more in our lesson on Chapter 12: Family Farmers and Fishermen. Also, check out The Law of Debtors and Creditors: Text, Cases, and Problems for additional insights.

Chapter 15: Cross-Border Cases

Chapter 15 bankruptcy deals with cross-border insolvency cases, providing an effective mechanism for dealing with debtors and assets involving more than one country. For further understanding, refer to our article on Chapter 15: Cross-Border Cases.

Warning: Each type of bankruptcy has specific eligibility requirements and implications. Make sure to consult with a bankruptcy attorney to choose the right option.

Comparison of Bankruptcy Chapters

graph TB; Chapter7["Chapter 7: Liquidation"] -->|Asset Liquidation| Creditors["Creditors Paid"]; Chapter11["Chapter 11: Reorganization"] -->|Debt Restructuring| Business["Business Continues"]; Chapter13["Chapter 13: Wage Earner's Plan"] -->|Repayment Plan| Debtors["Debtors"]; Chapter9["Chapter 9: Municipalities"] -->|Debt Adjustment| Municipality["Municipality"]; Chapter12["Chapter 12: Family Farmers"] -->|Debt Repayment| Farmers["Farmers & Fishermen"]; Chapter15["Chapter 15: Cross-Border"] -->|International Insolvency| Cases["Cross-Border Cases"];

For further details on the structure and provisions of the Bankruptcy Code, refer to our next lesson on the Structure of the Bankruptcy Code.