Your Guide To Understanding Bankruptcy

Bankruptcy is a process in which people who can no longer pay back their creditors are given a fresh start by eliminating debts or by setting up a payment plan. Liquidation of assets is common among bankruptcy debtors as a means of repaying creditors. Many people feel that bankruptcy is the solution to major financial problems, such as with excessive debts or foreclosures. However, bankruptcy stays on one’s credit record for many years, making it extremely difficult to get by in life. There are several different types of bankruptcy that can be filed, depending on factors such as about of debt, income, and their current financial situation.

Chapter 7

Filing a petition with the bankruptcy court is appropriate for both private individuals and businesses of any size. For companies who are interested in going out of business and looking to liquidate, Chapter 7 is the best choice among bankruptcy laws. It is also a simple way to settle debts without a long on-going case. In a Chapter 7 bankruptcy case, the laws (depending on the state) will determine which possessions will be ceased and which can be kept by the debtor. The trustee will then sell the ceased possessions to help pay off as much debt as possible.

  • United States Court: Learn about alternatives to Chapter 7, background information, eligibility, and how Chapter 7 works.
  • Corporate Bankruptcy: The United States Securities and Exchange Commission presents information on several Chapters and the bankruptcy process.
  • Facts for Consumers: Find information on Chapter 7 and the alternatives to bankruptcy from the Federal Trade Commission.
  • Personal Financial Choices: Here you will find general information on Chapter 7 and how life will be after a Chapter 7 bankruptcy.

Chapter 9

The purpose of Chapter 9 bankruptcy is to negotiate a plan for repayment between the creditors in question and the municipality. Municipalities include cities, townships, counties, and school districts. This could include one or several terms of repayment, including a reduction in the interest rating or in the total outstanding debt. It could also include an extension in refinancing debts or of the term of the loan. A municipality is defined under state jurisdiction, making it nearly impossible for creditors to force assets to be liquidated.

  • Municipal Bankruptcy Relief: The National Bankruptcy Review Commission offers information on Chapter 9 bankruptcy.
  • Chapter 9 Bankruptcy: Learn about the various aspects of Chapter 9, including purpose, eligibility, proofs of claim, Court’s limited power, and role of creditors.
  • Parts of Chapter 9: Find information on several parts included in Chapter 9 bankruptcy, such as concealment of assets, false oaths and claims, and bribery.
  • Municipal Bankruptcy Summary: Read a summary of Chapter 9, as well as information on Federal laws and state authorizations.

Chapter 11

During a Chapter 11, the debtor will typically have the opportunity to keep all assets. This type of bankruptcy is used for individuals, partnerships, and corporations. Unlike the limit in Chapter 13, the Chapter 11 bankruptcy claim has no limit on the amount of debt, making it a good choice for larger businesses looking to repair their debt problems. In many cases, the business will have the chance to continue business under the supervision of the court. Appointed from the United States Trustee, a creditors committee will oversee all debt operations and negotiate a plan for repairing debt.

  • Chapter 11 Reorganizations: Find out about Chapter 11 eligibility requirements, initiating bankruptcy, and the use of cash collateral.
  • Downloadable United States Code: Download documents about Chapter 11 bankruptcy from the U.S. House of Representatives.
  • Bankruptcy Reorganization: The Internal Revenue Service (IRS) provides several sections about Chapter 11, including purpose, early events, claim bar dates, and the plan process.
  • Department of Revenue: The Department of Revenue (DOR) gives provisions of the Bankruptcy Code and information on Chapters 7, 11, 12, and 13.

Chapter 12

Chapter 12 is typically directed towards individuals or couples who operate an owned, independent farm or business that is ran by a family. The size of the debt will also be a large factor for putting in a petition for Chapter 12. The percentage of the total household income, usually around 80 percent, must come from fishing or farming. Compared to many other chapters in bankruptcy, Chapter 12 works to help those who have seasonal income get out of debt in a timely manner.

Chapter 13

When filing for Chapter 13 bankruptcy, the debtor may have the opportunity to repay some or all of their debts under better terms, such as a lower interest rate. The process typically involves restructuring all debts in order for the debtor to repay the creditors with any income they earn in the future. Chapter 13 is a good choice for those who maintain a regular income and are willing to negotiate certain reductions and adjustments to pay off their debts. According to the United States Bankruptcy Code, the debtor has a period of 5 years to repay the creditors, while an attorney safeguards all interest.

  • Bankruptcy FAQ: Get answers to your questions about bankruptcy, such as what bankruptcy can and cannot do for you.
  • New Laws for Chapter 13: Congress has created new laws that would affect those filing under Chapter 13, making bankruptcy harder to claim.
  • Considering Bankruptcy: Find tips on how to manage your finances during struggles and important information about several Chapters.
  • Chapter 13 Bankruptcy Cases: Take this appeal quiz to learn about the procedure needed to move through the Federal Courts.

Chapter 15

Foreign debtors must go through Chapter 15 to help clear debts while maintaining clear communications between the countries involved in the process. Collecting debt between countries can be difficult due to differences in the laws and the fact that other countries are not under United States jurisdiction. Chapter 15 sides with the foreign entity to repay any debts and ensure that all debts are paid through the government. This chapter also allows foreign countries to work with the United States to settle debt situations.

SIPA – Securities Investor Protection Act

The Securities Investor Protection Act (SIPA) is a law that establishes the Security Investor Protection Corporation (SIPC). This act is used to insure investors for amounts up to $500,000 if the given brokerage firm remains a member. Up to $100,000 can be used for cash accounts. Private insurances are adopted by many firms in order to increase this coverage for insurance past these limits. However, this coverage is not developed to protect investors in case of market conditions.

  • Securities Investor Protection Corporation: Here you will find the official Securities Investor Protection Corporation, or SIPC, and how it protects their investors.
  • The Library of Congress: Information regarding the Securities Investor Protection Act of 1970 used to provide insurance coverage to investors.
  • Securities Investor Protection Act: Find a general overview and description of the Securities Investor Protection Act and the difference between SIPA and Bankruptcy Code liquidations.
  • Law Reviews: Here you will find notes on the Security Investor Protection Act of 1970.

Bankruptcy is a major life change and the effects of your choice can follow you for up to 10 years. The requirements for claiming bankruptcy has also become very strict, due to new bankruptcy laws. It is important to realize that declaring bankruptcy is not the way to get out of debt fast. This form or repayment should only be used as a last resort. There are several alternatives that can be used to help you get out of debt without having to declare bankruptcy, such as debt consolidation or credit counseling. Learning about your options and the hovering effects that bankruptcy can have on your life can help you make an education decision.