Chapters 7, 9, 11, 12, 13

By Daisy Rogozinsky
/
June 1, 2022

The United States Bankruptcy Code has a number of chapters outlining rules for how certain types of bankruptcy cases should be handled. In this article, we’ll explain the rules included in chapters 7, 9, 11, 12, and 13. 

Key Takeaways

  • In Chapter 7 bankruptcy, all of the debtor's assets are liquidated
  • Chapter 9 bankruptcy allows for municipalities to earn protection from creditors while they develop a plan for paying their debts
  • Chapter 11 bankruptcy allows for businesses to continue to operate while they restructure their debts with the goal of becoming profitable again
  • Chapter 12 bankruptcy gives family farmers and family fishermen three to five years to pay back their creditors
  • Chapter 13 bankruptcy allows debtors with an average income to develop a plan to pay back parts or all of their debts

What Is Chapter 7? 

Chapter 7 bankruptcy is also called liquidation bankruptcy or straight bankruptcy. It’s available to both individuals and businesses. This type calls for the debtor’s assets to be sold, or liquidated, in order to pay their creditors. Most Chapter 7 bankruptcy debtors get at least some of their debts discharged.

The Chapter 7 bankruptcy process is usually the fastest of the various types, sometimes taking as little as four months.

To qualify for Chapter 7 bankruptcy, your current monthly income must be less than the median income for households of your size in your state.

What Is Chapter 9?

Chapter 9 bankruptcy is bankruptcy for municipalities such as cities, towns, counties, and school districts. Municipalities that file for Chapter 9 bankruptcy earn protection from creditors while they develop a plan for adjusting their debts. 

Detroit became the biggest city in U.S. history to file for Chapter 9 in 2013. 

What Is Chapter 11?

Chapter 11 bankruptcy is also called a reorganization bankruptcy. It’s available to both individuals and businesses. Unlike with Chapter 7 bankruptcy, debtors filing Chapter 11 remain in control of business operations and are not required to sell off all assets. Instead, the goal is for the business to be able to resume operations and become profitable again after the bankruptcy process. Chapter 11 debtors must submit a plan for how they will restructure and pay off their debts over time. 

Chapter 11 offers a major advantage to the debtor of allowing them to stay in operation while their debts get restructured. But it is more costly and lengthy than Chapter 7, with higher court and attorney fees. This is why major corporations are most likely to file Chapter 11. 

What Is Chapter 12? 

Chapter 12 is a specific type of bankruptcy designated for family farmers and family fishermen under financial distress. Under chapter 12, the debtor can come up with a plan to pay back their creditors over a period of three to five years. 

What Is Chapter 13?

Chapter 13 bankruptcy is also referred to as a wage earner plan. In Chapter 13 bankruptcy, an individual with a regular income is allowed to develop a plan to pay back parts or all of their debts. Unlike Chapter 7, Chapter 13 allows debtors to avoid foreclosure on their houses.

Related News

Garnishment
Lia Kopin-GreenApril 26, 2022
First-Party Coverage
Daisy RogozinskyJune 13, 2022
Trustee
Daisy RogozinskyJune 22, 2022
Substantive Consolidation
Daisy RogozinskyJune 22, 2022
Attorney At Law is changing how clients connect with lawyers. By providing an innovative platform to lawyers who want to expand their practice’s reach, AAL is bringing law practices into the future.
+1 (888) 529-9321
6142 Innovation Way
Carlsbad, California 92009
© 2022 Attorney at Law | All right reserved
Some of the content of this website may be considered attorney advertising under the rules of certain jurisdictions. The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship.
menuchevron-up linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram