DIFFERENT CHAPTERS IN BANKRUPTCY

Bankruptcy filings are classified according to the chapters in the United States Bankruptcy Code. There are five different types of bankruptcy.  However, the vast majority of individuals file either Chapter 7 or Chapter 13 cases.  Chapter 7 is also available to companies.  Chapter 11 cases are filed much less frequently and may be filed by individuals and companies.  To fully understand all of your options discuss these chapters with a Utah bankruptcy attorney.  Below is a brief explanation for each type of bankruptcy available under the bankruptcy code:

Chapter 7: Chapter 7 bankruptcy is the most common.  The Chapter 7 option is available to individuals, companies or corporations.  It is often referred to as a “liquidation” bankruptcy.  The person or entity filing the Chapter 7 bankruptcy is relieved of most, if not all, of the debtor’s debts (certain debts are not dischargeable).  In a Chapter 7 bankruptcy, a trustee is assigned to the case. A trustee may be allowed to take certain assets of the debtor, but the law allows the debtor to keep certain “exempt” property.  Most Chapter 7 cases are over within several months of filing but in certain complicated cases (generally cases where there are a lot of assets) the process could last several years.  Chapter 7 bankruptcy allows most debtors to get a “fresh start.”  Be aware that individuals who file for a Chapter 7 bankruptcy are subject to an income limit.

Chapter 9: Chapter 9 cases are not common.  This chapter is only available for municipalities wherein they are allowed to reorganize their debt.

Chapter 11: Chapter 11 is available to individuals, companies and corporations.  Cases under this code section are filed infrequently.  A Chapter 11 bankruptcy case allows the debtor to reorganize the debtor’s debt through a customized plan.  Chapter 11 cases can be quite complex and are usually much more expensive than Chapter 7 or Chapter 13 cases.

Chapter 12: These cases are filed infrequently.  A Chapter 12 case is a special type of bankruptcy option available only to farmers.

Chapter 13: This is a reorganization bankruptcy available only for people.  Companies or corporations are not allowed to file Chapter 13 cases.  A Chapter 13 bankruptcy allows an individual to reorganize his or her debts through a bankruptcy plan.  The individual pays a “plan payment” to a Chapter 13 trustee and the trustee distributes the monthly payment to creditors.  These plans generally last for a three to five year period.  Usually a debtor’s tax debts, secured debts and unsecured debts are all treated in this plan.  Sometimes only certain debts are paid through the trustee while other debts are paid outside of the Chapter 13 plan directly to creditors.  There is a debt limit for Chapter 13 cases but there is no income limit.

 

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Justin M. Myers

Justin M. Myers Attorney-At-Law, LLC

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