Bankruptcy is divided up into chapters. The main
types are Chapter 7, 11, 12 and 13. Chapter 9 is for government municipalities,
and Chapter 15 is for ancillary and other cross-border cases.
Selecting
a Chapter
The selection of the proper chapter by debtors
seeking relief from theirfinancial hardships is best done after consultation
with an attorney
experienced in bankruptcy, reorganization, and debt adjustment
law. Prior to filing
bankruptcy, the debtor should, with counsel, develop a comprehensive
strategy to fully maximize his legal rights under the bankruptcy laws.
Chapters
The most common are Chapter 7, 11 and 13. Less utilized
are Chapters 9, 12, and 15. The selection of which chapter to file
the case under is based on each debtor's own particular set of financial
circumstances and goals. Some debtors may wish to reorganize their
personal
and business
affairs, while others may wish to simply have their assets liquidated,
wipe out their debts, and get a fresh start.
- Chapter
7 is what has been called straight, or liquidation,
bankruptcy--sometimes, "good old fashioned" bankruptcy.
These cases can be filed by individuals, partnerships, or
corporations.
- Chapter
9 is a process for a municipality or other government
entity to arrange for an adjustment of its debts. One such
municipality, Vallejo, California, filed a Chapter 9 bankruptcy
seeking an adjustment of its collective bargaining agreements
with city employees.
- Chapter
11 is a reorganization process, and is open for individuals,
partnerships and corporations. It is typically filed by persons
engaged in business, but this is not a requirement. Recently,
the courts have seen a dramatic upswing in the number of Chapter
11 filings by individuals involved in the "mortgage meltdown"
and real estate downturn. Often, these individuals have secured
debt in excess of the limits of Chapter 13.
- Chapter
12 is for family farmers or fishermen with regular
annual income seeking an adjustment of debts.
- Chapter
13 is a debt adjustment plan available for individuals
only. No partnerships or corporations may file. In Chapter
13, the debtor signs up for a 3-5 year repayment plan, to
repay all or a portion of his debts. The money is paid to
a court-appointed Chapter 13 trustee,
who acts essentially as a disbursing agent or conduit to distribute
the money to creditors.
- Chapter
15 is for debtors who are the subject of pending foreign
or cross-border bankruptcy proceedings. It is a relative newcomer
to the bankruptcy arena, having been enacted as part of the
sweeping Bankruptcy Reform and Consumer Protection Act of
2005 ("BAPCA").
|
Strategies
for the Debtor |
|
Written
by Henry
Rendler
|
|
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