Bankruptcy Chapters

Personal bankruptcy is a difficult decision to make. It''s made even more difficult by the intricacies of the Bankruptcy Code. Different bankruptcy chapters offer a number of bankruptcy options.

The Bankruptcy Code

The U.S. Bankruptcy Code covers all aspects of personal bankruptcy in the United States. The Bankruptcy Code is divided into bankruptcy chapters, each dealing with specific types of bankruptcy for different groups.

In 2004, the revised Bankruptcy Abuse Prevention and Consumer Protection Act was signed into law by President George W. Bush. The new bankruptcy laws have made it more difficult to qualify for certain bankruptcy chapters, especially Chapter 7 bankruptcy.

Bankruptcy Chapters

The bankruptcy chapter a debtor qualifies for depends on his income, his debt-to-credit ratio and other factors. Businesses may be assigned to Chapter 11 bankruptcy, while an individual seeking personal bankruptcy may qualify for either Chapter 13 or Chapter 7 bankruptcy.

The following are some of the more common bankruptcy chapters that may affect personal bankruptcy. Please remember that this is only basic bankruptcy information: For more detailed information, it''s recommended that you seek the advice of a bankruptcy lawyer or financial professional.

• Chapter 7 Bankruptcy Information:Chapter 7 bankruptcy is one of the most common choices for personal bankruptcy. Chapter 7 bankruptcy is what most people think of when they think of personal bankruptcy. In Chapter 7, the debtor''s disposable assets are liquidated by a Bankruptcy Court trustee and are divided among his creditors. Once this is done, all debts are erased.Chapter 7 bankruptcy has always been a popular choice for personal bankruptcy, as once assets are liquidated, the individual is debt-free. All other bankruptcy chapters require the debtor to pay back at least a portion of their debts to creditors.New bankruptcy laws have made it more difficult to qualify for Chapter 7 bankruptcy. Debtors must complete a means test to determine if their income is lower than the average income in their state. If the debtor''s income is below average, he can apply for Chapter 7 bankruptcy. If not, the debtor must petition for personal bankruptcy under Chapter 13 bankruptcy rules.
• Chapter 9 Bankruptcy Information:Chapter 9 bankruptcy is not intended for personal bankruptcy. A Chapter 9 bankruptcy is designed for municipal bankruptcies only.
• Chapter 11 Bankruptcy Information:Chapter 11 bankruptcy is usually reserved for businesses, but it is occasionally appropriate for personal bankruptcy if the debtor has high amounts of assets and debts. During Chapter 11 bankruptcy, the debtor''s finances are reorganized and he is expected to pay back at least a portion of what is owed to creditors.
• Chapter 12 Bankruptcy Information:Chapter 12 bankruptcy closely resembles Chapter 13 bankruptcy, but it is intended to help a specific group. Only family farmers and fishermen can apply for Chapter 12 bankruptcy.
• Chapter 13 Bankruptcy Information: Chapter 13 bankruptcy is one of the most common bankruptcy chapters. New bankruptcy laws have made personal bankruptcy with Chapter 13 more common, as less people are able to qualify for personal bankruptcy under Chapter 7.Chapter 13 bankruptcy is for individuals who have enough income to pay back at least a portion of their debt. In Chapter 13 bankruptcy, Bankruptcy Court judges determine a financial rehabilitation program. The debtor is expected to pay a set amount back to creditors over the course of three to five years.
• Chapter 15 Bankruptcy Information:Chapter 15 bankruptcy is one of the most complicated personal bankruptcy chapters. Under the new bankruptcy laws, Chapter 15 bankruptcy is designed for occasions where the debtor has creditors both inside and outside the United States.The goal of a Chapter 15 bankruptcy is to allow debtors to resolve issues of credit without discriminating against foreign creditors. Like Chapter 13 bankruptcy, Chapter 15 bankruptcy reorganizes the debtor''s finances so creditors receive at least some repayment.

Resources

North American Military Financial Education Center (n.d.). The Four "Chapters" of Bankruptcy. Retrieved December 22, 2007, from the University of Maryland University College Web site: militaryfinance.umuc.edu/bankruptcy/bankruptcy_4_chaps.html.

U.S. Courts (n.d.). Chapter 12: Family Farmer or Family Fisherman Bankruptcy. Retrieved December 22, 2007, from the U.S. Courts Web site: www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter12.html.

U.S. Courts (n.d.). Chapter 15: Ancillary and other Cross-Border Cases. Retrieved December 22, 2007, from the U.S. Courts Web site: www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter15.html.

U.S. Courts (n.d.). Chapter 9: Municipal Bankruptcy. Retrieved December 22, 2007, from the U.S. Courts Web site: www.uscourts.gov/bankruptcycourts/bankruptcy

basics/chapter9.html#purpose.