Understanding Bankruptcy Chapters
Bankruptcy laws are complex and confusing to most people. Until someone is forced to file for bankruptcy due to the potential of losing their home to foreclosure or they have had credit card judgments placed against them, they may not understand the various chapters of the bankruptcy laws. Here are the basic types of bankruptcy and how they are typically used
Chapter 7 - This is the most common type and the easiest form of bankruptcy to file. In effect, the debtor forfeits all non-exempt assets, which are sold and used to pay off debt. Any remaining debt will then be discharged, unless it falls under fraud. This chapter also non-exempts debts such as student loans, taxes or support. This type of bankruptcy is used by individuals or businesses;
Chapter 9 - This form of bankruptcy is used only by municipalities. This federal filing allows a state, city or town to discharge their debts;
Chapter 11 - This is more commonly referred to as a reorganization plan or corporate bankruptcy. Chapter 11 allows businesses to reorganize their debts to make them easier to pay. Some wealthy individuals may elect to use this form of bankruptcy though it is typically used by companies;
Chapter 12 - This chapter of the bankruptcy laws is specifically designed for those who make a living as fishermen or farmers;
Chapter 13 - Known more commonly as the wage earners bankruptcy, this allows debtors to repay their debts using a court-approved payment plan;
Chapter 15 - Primarily used by foreign debtors who may owe debts in both the United States and in foreign countries.