Bankruptcy is of several types, each of which has varying purposes and caters to different kinds of debtors. Learn more about the differences in types of bankruptcy.
Types of Bankruptcy
The chapter 7 bankruptcy is also regarded as the liquidation or straight bankruptcy. You can file whether you are an individual or married couple, however, your income should be less than the state’s median income for your family size. In the process, your liquid assets are taken up and some or all of your debt is discharged.
If you are a corporate debtor, your debt isn’t discharged. However, you still have to give up your liquid assets, the proceeds of which are distributed among your creditors.
Chapter 9 bankruptcy only applies to municipalities such as school districts, airports, taxing entities, cities and towns. The municipality doesn’t go out of business, but just renegotiates debt terms with its creditors.
Chapter 11 or the reorganization bankruptcy is generally for business entities, but an individual may also be able to file in some cases. If you file, you renegotiate your debt terms, and can also petition the court to discharge your debts. Your assets may be liquidated. During this period, you are referred to as debtor-in-possession, and continue to be in business.
Chapter 12 is solely for fishermen and farmers. It is similar to chapter 11 and 13, but offers a more flexible repayment plan that factors in seasonal harvests.
Chapter 13 is a personal bankruptcy, applicable to both individuals and married couples. Once you file, you have 3 to 5 years to pay your remaining debt, which can include unsecured obligations as well. Unlike chapter 7, you don’t have to give up any of your assets.
This bankruptcy is for a foreign entity undergoing an insolvency proceeding outside the US, but wants an access to the country’s courts to administer assets in an attempt to protect them.
If you or your business is struggling with debt problems, a bankruptcy lawyer in Houston can help you learn more about your options. Always take the time to get educated about proper debt relief solutions before making a move.