US Bankruptcy Laws – A Comprehensive Summary of the Five Bankruptcy Chapters
Bankruptcy laws help both corporations and individuals when they are no longer able to pay the
debts they have. However, these laws are rather complex and, thus, if you consider insolvency, you must
know exactly what your options are.
When you file for bankruptcy, it is important to know the differences between the various Chapters
of the law. In the US, there are five Chapters under which a debtor can file:
Chapter 7 – the “fresh start”. This is the most common form of bankruptcy, and can be filed
•
both by individuals and corporations. The debtor’s exceeding assets are sold in order to pay creditors,
while the remaining debt is erased.
Chapter 9 – the debt adjustment for municipalities. Similar to Chapter 11 reorganization, this
•
form is only available for municipalities (villages, counties, municipal utilities, school districts, etc.).
Chapter 11 – the reorganization for corporations. Under this Chapter, companies are allowed
•
to function while repaying creditors through a reorganization plan approved by court.
Chapter 12 – the debt adjustment for farmers and fishermen. Under this form, similar to
•
Chapter 13, but exclusively for fisherman and farmers, the debtors repay the creditors in three to five years
according to a plan.
Chapter 13 – “rehabilitation”. This Chapter allows the debtor to keep his/her assets while
•
paying the debtors according to a three to five-year repayment plan.
It is essential to understand that bankruptcy laws are meant to protect the debtors even if liquidation
of assets and repayment plans may not initially seem like a good idea for debtors.
Bankruptcy laws help both corporations and individuals when they are no longer able to pay thedebts they have. However, these laws are rather complex and, thus, if you consider insolvency, you mustknow exactly what your options are.
When you file for bankruptcy, it is important to know the differences between the various Chaptersof the law. In the US, there are five Chapters under which a debtor can file:
Chapter 7 – the “fresh start”. This is the most common form of bankruptcy, and can be filed•both by individuals and corporations. The debtor’s exceeding assets are sold in order to pay creditors,while the remaining debt is erased.Chapter 9 – the debt adjustment for municipalities. Similar to Chapter 11 reorganization, this•form is only available for municipalities (villages, counties, municipal utilities, school districts, etc.).Chapter 11 – the reorganization for corporations. Under this Chapter, companies are allowed•to function while repaying creditors through a reorganization plan approved by court.Chapter 12 – the debt adjustment for farmers and fishermen. Under this form, similar to•Chapter 13, but exclusively for fisherman and farmers, the debtors repay the creditors in three to five yearsaccording to a plan.Chapter 13 – “rehabilitation”. This Chapter allows the debtor to keep his/her assets while•paying the debtors according to a three to five-year repayment plan.
It is essential to understand that bankruptcy laws are meant to protect the debtors even if liquidationof assets and repayment plans may not initially seem like a good idea for debtors.
US Bankruptcy Laws – A Comprehensive Summary of the Five Bankruptcy Chapters