Bankruptcy Laws

The bankruptcy laws are embodied in Title 11 of the United States Code — appropriately called the “Bankruptcy Code.”  Under the Bankruptcy Code, there are six types of bankruptcy filings labeled by the chapter of the Bankruptcy Code.  The two most relevant for the individual debtor is Chapter 7 and Chapter 13.

Chapter 7. A bankruptcy filing under Chapter 7 of the Bankruptcy Code is the most common type of bankruptcy filing and will discharge most debts of an eligible debtor.  Also, debtors are generally allowed to keep most of their personal property because the property is exempt under the Bankruptcy Code.

Chapter 9. This chapter is for the reorganization of municipalities.

Chapter 11. This chapter mostly applies to the reorganization of businesses.

Chapter 12. This chapter allows family farmers and fishermen to repay their debts over a period of time.

Chapter 13. A Chapter 13 bankruptcy case provides the debtor a chance to reorganize and adjust their finances to pay their creditors all or some of the money owed.  This is accomplished by sumitting a plan to the bankruptcy court seting forth the payments that the debtor will make to the creditors over the next 3 to 5 years.  This allows the debtor to move forward without liquidating any assets and having the confidence that, if he or she fulfills the obligations under the plan, the debtor receives a discharge of their debts even if the plan only provides for a payment of a portion of the total debt.

Chapter 15. A Chapter 15 applies to cross-border insolvency cases.