Bad Credit - Bankruptcy Information and Resources

Merchant Warehouse |

May 31, 2012

Bad Credit - Bankruptcy Information and Resources

Bankruptcy may be defined as the legal process that absolves a person who has become unable to pay their creditors the debts owed absolution. There are various types or chapters of bankruptcy. Bankruptcy is under Federal jurisdiction and there are certain laws that govern bankruptcy in each state. These laws are initiated by Congress and consist of Title 11 of the United States Code, which is known as the Bankruptcy Code. The main chapters or types of bankruptcy include Chapter 7, Chapter 9, Chapter 11, Chapter 13, and Chapter 15.

Chapter 7

Chapter 7 bankruptcy is filed for individuals or private citizens as well as businesses. Many businesses that are failing and wish to liquidate their businesses find that Chapter 7 is the most favorable option. Chapter 7 is the most common form of bankruptcy filed within the United States. One of the benefits of Chapter 7 bankruptcy is that private citizens are able to retain certain possessions as applicable to state law.

Chapter 9

Chapter 9 and Chapter 11 bankruptcy are applicable to municipalities. Though they have some similarities, Chapter 9 has some distinctive characteristics. Some of these characteristics include collective bargaining, which allows a municipality to change collective bargaining agreements, or negotiations between employers and their employees. This can allow a municipality to re-negotiate terms under a Chapter 9 bankruptcy. 

  • Municipality Bankruptcy:  The United States Courts examines Chapter 9 bankruptcy.

  • Municipal Bankruptcy Information:  Orrick looks at Chapter 9 bankruptcy in this PDF document. 

  • Municipal Bankruptcy Facts:  Bankruptcy is not an Option for Wisconsin: The University of Wisconsin Extension explores Chapter 9 bankruptcy. 

  • Municipal Bankruptcy: State Authorization Under the Federal Bankruptcy Code: Public Law Research Institute explores Municipal Bankruptcy, also known as Chapter 9 bankruptcy. 

  • Bankruptcy:  Kellogg School of Management explores the topic of bankruptcy in this PDF document. 

Chapter 11

Chapter 11 is a good choice for large businesses that need to reorganize or restructure under bankruptcy law. One of the main advantages of Chapter 11 bankruptcy is that the business will have the opportunity to remain operable. Additionally, businesses, corporations, and partnerships that file Chapter 11 may file this type of bankruptcy regardless of debt amount. This is in contrast to Chapter 13 bankruptcy that places debt limits. A large business that would like to remain operable while undergoing bankruptcy will find that Chapter 11 is the most favorable option.

Chapter 12

Chapter 12 bankruptcy is reserved for family farms or family run fisheries. In order to qualify for this type of bankruptcy, the family must earn at least 80% of their income from either farming or fishing. There are similarities between Chapters 12 and Chapter 13 bankruptcies but Chapter 12 is more applicable to those in the fishing and farming industries. Chapter 12 allows more exemptions for family run farms and fisheries than other bankruptcy options.

Chapter 13

Chapter 13 bankruptcy is also referred to as Wage Earner Bankruptcy. It is a plan that allows those who still have an income repay their debts in an affordable manner. Those who file a Chapter 13 bankruptcy must have their repayment plans approved by the court. The main difference between Chapter 7 and Chapter 13 bankruptcy is that Chapter 7 absolves your debts while Chapter 13 is a form of debt consolidation.

Chapter 15

Chapter 15 bankruptcy pertains to cases that are international and court proceedings that cross national boundaries. If a bankruptcy case overseas involves assets that are on American soil, then Chapter 15 bankruptcy is applicable. Whereas many bankruptcy codes are based upon United States bankruptcy code, Chapter 15 is based upon the United Nations’ drafted Model Law on Cross Border Insolvency code. Chapter 15 ensures that the countries involved in the bankruptcy proceedings must have open communication and utilize fair practices. The United States will work with the foreign country in handling the bankruptcy case.