The most common types of bankruptcy are Chapter 7, Chapter 11, and Chapter 13 according to the U.S. Bankruptcy Code. In previous articles, we’ve introduced Chapter 7 and Chapter 11. Today we’re going to offer a breakdown of Chapter 13 and other rare types of bankruptcy.
Chapter 13: Debt Repayment with Specific Payment Plans.
In case you don’t know, Chapter 7 is designed for individuals with few assets and Chapter 11 is designed for businesses who want to create probability again. However, applicants for chapter 13 are mostly individuals who earn too much to qualify for chapter 7 and businesses who have consistent income and do not want to file chapter 11.
Chapter 13 is also known as a wage earner’s plan, since this chapter allows individuals and businesses that have consistent income to make feasible debt repayment plans. Then they will be able to repay the debts with their income, commonly in installments within 3 to 5 years. Also, the debtors will be allowed to keep all their property, including otherwise nonexempt property. In short, Chapter 13 simply provides a grace period to avoid making people escape from overwhelming debts.
Other Minor Types of Bankruptcy Filings
Aside from the most common – Chapter 7, 11 and 13, the Code also provides lots of minor types for various kinds of bankruptcy. For example:
Chapter 9 bankruptcy allows financially distressed municipalities, such as cities, towns, villages, counties, and school districts, to declare themselves bankrupt and delay repayments. Filing under Chapter 9, a municipality does not have to liquidate assets to repay, and is allowed to create a plan for repayment over a period of time.
Chapter 12 bankruptcy provides relief to agricultural areas. For example, family farms and fisheries can apply. As is known to all, natural disasters can be nightmares for agricultural industries, making them suffer severe financial losses. Filing under the Chapter 12 bankruptcy, applicants are allowed to stay in business as long as they can make a productive repayment plan.
Chapter 15 bankruptcy works for cross-border cases, commonly seen among international businesses. In such cases, the petition is usually filed in the debtor’s home country. Since it involves parties from more than one country, it’s usually more complicated than other type of bankruptcy.