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6 Types of Bankruptcy

6 Types of Bankruptcy
"According to Title 11 of the United States Code (also known as the Bankruptcy Code), there are six categories of bankruptcy in the United States. Although only a few of these six types, also known as ""chapters,"" are commonly used, it can be fascinating and useful to learn about them all. Here is some information regarding the six distinct bankruptcy chapters:

7th Chapter

The most prevalent of the six varieties, Chapter 7 bankruptcy governs the liquidation procedure. Liquidation is the process by which the assets of a company or individual are redistributed or dissolved; it can be voluntary or involuntary. A trustee is appointed when a business applies for Chapter 7 bankruptcy to oversee the liquidation process. The trustee determines which of the company's debts are legally enforceable and which creditors must be paid, as opposed to relationships that will be dissolved.

When an individual files for Chapter 7 bankruptcy, he or she is permitted to retain certain exempt property. Certain categories of debt, including home mortgages, child support, and student loans, do not qualify as exemptions.

9th Chapter

Chapter 9 bankruptcy is only available to municipalities. In the past, if a municipality was unable to pay its obligations, certain actions were taken, such as increasing taxes. During the Great Depression, when raising taxes did little to enhance a municipality's financial situation, Chapter 9 bankruptcy was created. A municipality must seek state sanction before filing Chapter 9 bankruptcy in some locations. Jefferson County, Alabama, and Orange County, California, were the most infamous Chapter 9 cases.

11 Chapter

This form of bankruptcy is available to both corporations and individuals, but corporations use it more frequently. Chapter 11 differs from Chapter 7 in that the debtor retains substantial control over the assets. Instead of having a fiduciary in charge, the debtor retains control under court supervision. Chapter 11 focuses primarily on the reorganization of a business. With the restructuring measures, ownership of portions of the business and revenue rights can be transferred from the debtors to the creditors.

12 Chapter

Similar to Chapter 13, which will be discussed below, only farmers and fishermen are eligible for Chapter 12 bankruptcy. Initially, there were no provisions made for these agricultural professionals. Until 2005, when a permanent chapter was enacted, numerous addenda and amendments were included, each of which expired and was subsequently renewed.

Chapter 13

In contrast to Chapter 7, which liquidates assets and provides immediate debt relief, Chapter 13 is more of a debt rehabilitation proceeding. Similar to Chapter 11 in that it involves the reorganization and restructuring of assets. The debtor devises a plan to repay all creditors within three to five years. Because Chapter 13 requires a certain amount of disposable income to fund the bankruptcy plan, it may not be suitable for everyone.

Kapitel 15

This form of bankruptcy involves assets that are dispersed across multiple countries. The provisions enumerated in Chapter 15 of the Bankruptcy Code assist in mitigating problems caused by international litigation. In these instances, U.S. courts have discretion over whether to provide additional assistance to a party involved in a foreign law proceeding.""

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"6 Types of Bankruptcy" was written by Mary under the Finance / Wealth category. It has been read 148 times and generated 0 comments. The article was created on and updated on 01 June 2023.
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