As a consumer bankruptcy attorney, I limit my practice to chapter 7 bankruptcy and chapter 13 bankruptcy filings. Most individuals and small businesses fall into either one of these two types of bankruptcies. But there are many other chapters of bankruptcy beyond just a chapter 7 bankruptcy and a chapter 13 bankruptcy. This article discusses chapter 7 and chapter 13 bankruptcy along with the lesser known chapters of bankruptcy, and when and why these chapters may be appropriate.
Chapter 7 Bankruptcy: A chapter 7 bankruptcy is the most common bankruptcy for consumers. Also known as a liquidation bankruptcy, chapter 7 eliminates most, if not all, consumer debts. The time frame, from start to end, is usually about 90 days. When people think about bankruptcy, they usually think of chapter 7.
Chapter 9 Bankruptcy: A chapter 9 bankruptcy is a bankruptcy specifically tailored for government municipalities to reorganize debt. For example, both Stockton, California, and Detroit, Michigan are currently in chapter 9 bankruptcy proceedings.
Chapter 11 Bankruptcy: A chapter 11 bankruptcy usually applies to businesses and is used as a restructuring tool. A few of the major car manufactures have entered into a chapter 11 bankruptcy, and have come-out of the process as a restructured company (such as Chrysler); however, other companies have attempted a chapter 11 restructuring, but failed, and ultimately converted to a chapter 7 bankruptcy (Hostess, for example).
Chapter 12 Bankruptcy: A chapter 12 bankruptcy is exclusively available to family farmers and fishermen. This form of bankruptcy is similar in substance and procedure to a chapter 13 bankruptcy.
Chapter 13 Bankruptcy: A chapter 13 bankruptcy is the second most common type of bankruptcy, following chapter 7. A chapter 13 bankruptcy allows for the restructuring of a consumers debt over 3-5 years, where the consumer makes monthly payments to the plan for the benefit of creditors. Often, a chapter 13 bankruptcy is used to stop a foreclosure and catch up on mortgage arrears, pay down tax debt and domestic support obligations, cram down vehicle loans in terms of a principal reduction of loan amount and interest rate,avoid second liens on properties (in some instances) such as home equity lines of credit, and so on. In some instances, a consumer may not be eligible to file for a chapter 7 bankruptcy due to high income or a prior chapter 7 bankruptcy filing, and therefore must file a chapter 13 bankruptcy instead.
Chapter 15 Bankruptcy: A chapter 15 bankruptcy is designed for ancillary or cross-border claims; this includes debtors, assets, and claimants involving multiple countries.
Chapter 7 bankruptcy and chapter 13 bankruptcy are the most well-known of the bankruptcy chapters in the United States. However, there are other chapters available for a debtor (individual, business, municipality), provided the right circumstances exist.
If you are interested in learning more about bankruptcy and how it may benefit your financial situation, please call today for a free in-office bankruptcy consultation in Eugene.