Types of Bankruptcy
There are four common types of bankruptcy cases filed in California, Chapter 7, 11, 12, and 13. Below are brief explanations of each type of bankruptcy according to the federal Bankruptcy Code.
- Chapter 7 is the most common form of bankruptcy for individuals. It is a liquidation bankruptcy, which means that the court sells all your assets for cash and then pays your creditors. You can keep assets that are exempt from sale either under federal law or the law of your home state. Chapter 7 bankruptcy can wipe out most of your debts. There is a “means test” for filing this type of bankruptcy. You must make less than a certain amount of money. Talk to a lawyer to see if you qualify for this type of bankruptcy. You cannot repeat this type of bankruptcy filing for 6 years.
- Chapter 9 The purpose of chapter 9 is to provide a financially-distressed municipality protection from its creditors while it develops and negotiates a plan for adjusting its debts. Reorganization of the debts of a municipality is typically accomplished either by extending debt maturities, reducing the amount of principal or interest, or refinancing the debt by obtaining a new loan.
- Chapter 11 is a reorganization proceeding, usually for corporations or partnerships because of its complexity, but individuals can file too. The debtor usually keeps his or her assets and continues to operate the business and tries to work out a reorganization plan to pay off the creditors.
- Chapter 12 is a simplified reorganization for family farmers, where the debtor keeps his or her property and works out a repayment plan with the creditors.
- Chapter 13 is like Chapter 11 but for individuals. It is a repayment plan for individuals with regular income. Under this type of bankruptcy, you pay your debts off over a 3- to 5-year period and you keep your property. There are limits to how much debt and what type of debt you can owe to qualify for Chapter 13 bankruptcy. Talk to a lawyer to see if you qualify for a Chapter 13 bankruptcy.
- Chapter 15 The purpose of Chapter 15, and the Model Law on which it is based, is to provide effective mechanisms for dealing with insolvency cases involving debtors, assets, claimants, and other parties of interest involving more than one country.
Latest California Bankruptcy Filings by Type and California Bankruptcy District
|U.S. Bankruptcy Courts –– Business and Nonbusiness Cases Commenced, by Chapter of the Bankruptcy Code, During the Three-Month Period Ending March 31, 2013, Based on Data Current as of March 31, 2013|
|District||Predominant Nature of Debt ¹|
|Business Filings||Nonbusiness Filings|
|Total||Chapter 7||Chapter 11||Chapter 12||Chapter 13||Total||Chapter 7||Chapter 11||Chapter 13|
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