Bankruptcy is a legal declaration of the inability of an individual, a business, or another organization to pay its creditors. When filing for bankruptcy, a person or organization files a case under a particular chapter of title 11 of the United States bankruptcy Code.
When people talk about bankruptcy, they are usually referring to one of the two most common types: Chapter 7 or Chapter 13. However, when learning about your financial options, it is important to understand all of the different options that exist and how they might apply to your situation.
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There exist six types of bankruptcy under Title 11 of the U.S. Code:
Chapter 7. Chapter 7 is the simplest, quickest, and therefore most common form available. Also known as "straight" bankruptcy, it involves the basic liquidation of assets for individuals and businesses in exchange for the discharge of some of the debt. Chapter 9. Chapter 9 is also known as municipal bankruptcy and is meant to give protection from creditors to a municipality as it develops a plan to adjust its debts. Under Chapter 9, there is no liquidation of assets, as this would violate the Tenth Amendment. Chapter 11. Also known as rehabilitation or reorganization, Chapter 11 is usually used by business debtors but also sometimes by individual people who have incurred substantial debts or hold large assets. It usually allows companies to continue to do business as they repay their debts. Chapter 12. Chapter 12 was created specifically for family farmers and fishermen with regular annual income. Chapter 12 is somewhat of a combination of Chapters 11 and 13, and is designed as an economically plausible solution for those in the small farming and fishing businesses. Chapter 13. Also known as "wage-earner bankruptcy," Chapter 13 is a rehabilitation plan for individuals with a regular source of income. Chapter 15. Added to the U.S. Code in 2005, Chapter 15 deals with cases involving debtors, assets, and other parties in multiple countries.
In addition to the differences between each chapter, each case is overseen and carried out in a different manner. Each judicial district in the country has its own bankruptcy court. In chapters 7, 12, and 13 (and in a few chapter 11 cases) a trustee is appointed by the U.S. district court to oversee the case. In larger cases, a bankruptcy judge, who is a judicial officer of the U.S. district court, deals with the case.
To learn more about your financial options in the face of excessive debt, visit the website of the Milwaukee bankruptcy lawyers of the DeLadurantey Law Office for more information.
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