Chapter Bankruptcy
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Bankruptcy Code, Title 11 of the United States Codes, contains uniform laws that govern bankruptcy cases across the territory. Under this code, six type of bankruptcy case are discussed. Each of these six is covered under a separate chapter. This is the origin of the term ‘chapter bankruptcy.’ The most common chapters are 7, 11 and 13.[br]
Bankruptcy Code, Title 11 of the United States Codes, contains uniform laws that govern bankruptcy cases across the territory. Under this code, six type of bankruptcy case are discussed. Each of these six is covered under a separate chapter. This is the origin of the term ‘chapter bankruptcy.’ The most common chapters are 7, 11 and 13.[br]
Table of Contents
Chapter Bankruptcy 7
An individual or business entity can file a petition under Chapter 7. It is also called straight bankruptcy. Under this chapter, non-exempt assets of the debtor are subject to liquidation. The amount collected from the liquidated assets is used to repay creditors. The entire process of liquidation is managed by US court trustees. Their objective is to collect the maximum amount from liquidation to repay the entire debt. They also work to protect the interest of the debtor. Once the process is completed, the debtor receives a discharge which declares the end of all financial obligations under his/her name.
Chapter Bankruptcy 13
Chapter 13 bankruptcy involves the adjustment of debts for individuals. An individual who has accumulated high debts and wants to repay them over a period of three to five years can file a petition under this chapter. It is ideal for individuals who posses considerable amount of non-exempt property. Chapter 13 is also an alternative for individuals with a regular income. However, the income should be reasonable enough to repay the debt within a specific period of time.
Once an individual has filed a petition under Chapter 13, the court asks for a repayment plan. If the plan is in accordance with US federal laws, it is approved. Now, the debtor is bound to repay creditors within the specified period as per the court approved plan.
Chapter Bankruptcy 11[br]
Chapter 11 bankruptcy calls for a reorganization plan to settle debt of a commercial enterprise. Similar to Chapter 13, here the enterprise has an obligation to file a repayment plan within 120 days of the petition filing. The plan has to be approved by both the creditors and the respective bankruptcy court, before it comes into action. Chapter 11 entitles the debtor to end burdensome contracts, terminate leases and rescale operations to ensure profitability. Mostly, the debt enterprise enters into consolidation to reduce the debt load.
Filing a petition in a bankruptcy court offers protection to debtors against legal prosecution, garnishments and other creditor action. However, it is reflected in the credit report of the debtor for ten years.
