Overview of Types of Bankruptcy Available for Individuals, Businesses, & Corporations
There are four types of bankruptcy available to non-governmental entities. This would include individuals, spouses, sole proprietor businesses, partnerships and corporations including Limited Liability Companies.
Chapter 7 Bankruptcy
The most common type is Chapter 7 bankruptcy. Chapter 7 is used to discharge (wipe out) debts. It is used primarily by consumer debtors and sole proprietorship businesses. It is done less so with corporations because corporations do not get a discharge and cannot exempt (protect) things it owns. Chapter 7 Bankruptcy gets rid of unsecured non-priority debts like credit cards, personal loans, medical bills and deficiencies on repossessed vehicles. Chapter 7 allows the debtor to exempt (protect) from your creditors things like clothes, furniture, appliances, vehicles and such that the State of California legislature and Governor agreed that you should be able to keep. This is done to allow the debtor to start over and rebuild their life. Click this Chapter 7 Bankruptcy link for more information.
Chapter 11 Bankruptcy Reorganization Plans
Chapter 11 Bankruptcy is designed to allow a reorganization for individuals, spouses and businesses with large debts, as well as partnerships and corporations including Limited Liability Companies. This is the form of reorganization that you commonly hear about where large companies such as airlines and oil companies use to restructure their businesses. This allows the companies to continue to operate while they reduce their debts and overhead. This often includes closing failing segments of their business and laying off unneeded employees to become profitable again. Click this Chapter 7 Bankruptcy link for more information.
Chapter 12 Bankruptcy Reorganizations for Family Farmer’s
Chapter 12 bankruptcy is similar to a Chapter 13 below. It has set rules for a 3-5 year reorganization plan. This includes reducing mortgage debt down to the fair market value of the home and land, something that cannot be done in a Chapter 13 bankruptcy is in that it is a reorganization that is for
Chapter 13 Bankruptcy Reorganization Plans
The second most common is Chapter 13 bankruptcy reorganization. Chapter 13 Bankruptcy is a system of reorganization that, when done correctly, has the ability to force a reorganization of debt even when the creditors would not agree to the bankruptcy plan.