Under the United States Code of law, Title 11, the federal government takes bankruptcy under its wing by providing several types of bankruptcy for which you are able to file. Although some people may look at bankruptcy as a shameful thing and will only file for it as a last resort, it can actually really help a person hold their head above water by keeping the creditors at bay.
There are six types of bankruptcy, called chapters. Each chapter is for a specific strategy for battling your bankruptcy, and different people and organizations are helped under different chapters. The code chapters are 7, 9, 11,12,13, and 15. Once you determine the type of bankruptcy that best suits your needs, you can find an attorney that will advise you in the filing process and help get your feet back on the ground. This article will focus on the first three chapters.
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Chapter 7. Chapter 7 bankruptcy is also called liquidation or debt-elimination. It can be for both individuals and business entities, although usually only individuals can benefit from the debt-elimination. This is to help "honest" debtors, and aid them in starting fresh. With Chapter 7, a trustee is court-appointed to the estate. This trustee takes control of the property and liquidates, or sells, all of the nonexempt property. The money generated from the sales is used to pay back the creditors.
Chapter 9. Chapter 9 bankruptcy is specifically for municipalities. This includes cities, counties, school districts, municipal utility companies, etc. Created during the Great Depression, Chapter 9 protects municipalities while they reorganize and develop a repayment plan to get them out of debt. Unlike Chapter 7, this type of bankruptcy does not require any sort of liquidation to repay debts, instead relying on refinancing and other methods.
Chapter 11. Chapter 11 bankruptcy usually helps business entities, but it can be used by individuals with lots of assets as well. Chapter 11 is similar to Chapter 7 in that a trustee is appointed to oversee the estate, but in this case, the official is not required to liquidate assets. Instead, Chapter 11 typically allows for the "debtor in possession" to remain in control of the property and reorganize under the supervision of the trustee. This includes submitting reports detailing the workings of the property and the restructuring plans to the court.
These three chapters of bankruptcy can help everyone from individuals to municipalities to businesses. However, because some states include certain other requirements for filing for bankruptcy, it can be a good idea to contact an attorney for professional advice.
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