Learn the 6 Types of Bankruptcy Chapters
Many people don't realize that there are 6 types of bankruptcy chapters. Not all apply to the average individual, but this information may be of interest to you now or sometime in the future.
Under the United States Code, there are actually 6 types of bankruptcy chapters entitled under the Federal Bankruptcy Code. Below you will find each type of bankruptcy and see what each means.
The 6 bankruptcy codes are listed below:
- Chapter 7 - most people and/or businesses file chapter 7 for total liquidation of all eligible debts
- Chapter 9 - when a municipality files bankruptcy
- Chapter 11 - is filed when a business or sometimes an individual who wants to reorganize their debt
- Chapter 12 - is for family farmers and family fisherman
- Chapter 13 - is for individuals who wish to reorganize their debt with a repayment plan
- Chapter 15 - is regarding international cases
The most popular bankruptcy filing is Chapter 7. This allows the individual to liquidate most of their debt. Chapter 7 bankruptcy usually takes 3 months from start to finish. Consumers should know that Chapter 7 bankruptcy will reflect on their credit score for 10 years. Also, once you file Chapter 7 bankruptcy, you will not be permitted to file bankruptcy again for another 8 years. One last point, Chapter 7 bankruptcy does not mean all debt will be discharged. Things like child support, most student loans, and any taxes (federal, state and local) owed will need to be paid by you.
Most people know little about Chapter 9 bankruptcy. Chapter 9 bankruptcy calls for the resolution of municipal debts. Only a handful of municipalities have filed Chapter 9 since its inception in 1937. In 1994, Orange County, California filed a multi-million dollar Chapter 9 because the County Treasurer-Tax Collector misappropriated the county's tax dollars. He left the entire county bankrupt. This case personally affected me as I lived there and worked with the County of Orange at the time.
Chapter 11 bankruptcy is filed when a business or corporation needs to reorganize their debt. The corporation makes a plan to repay their debt in order to stay in business.
Chapter 12 bankruptcy is intended for family farmers and family fisherman who have normal income but high debt. Usually this type of bankruptcy allows these families to suggest a plan to repay all or part of their debt.
Chapter 13 bankruptcy is for individuals who wish to reorganize their debt with a repayment plan. Chapter 13 demonstrates you're taking some responsibility for your debt, therefore your credit score will be affected for 7 years instead of 10 years under Chapter 7.
Chapter 15 is basically a new chapter added in 2005 when Federal Bankruptcy Laws were changed. It involves methods for dealing with cases involving debtor issues for international cases.
As you can see, the 6 types of bankruptcy chapters will not involve most people. Federal Law has taken into account all types of circumstances so most people and corporations have the opportunity to alter and/or relieve their debt problems. If you fall into one of the 6 types of bankruptcy, please consider all you options.
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