People should be aware of the different types of bankruptcy so that they can choose the right option to manage their financial problem. Here is the information on various chapters of bankruptcy:
1. Chapter 7 bankruptcy: This type of bankruptcy is also known as liquidation bankruptcy. Chapter 7 Bankruptcy helps to discharge the debt much faster than any type of bankruptcy. Almost, in many cases the debtor gets discharged from his debts within months of filing a bankruptcy petition by the attorney. A court appointed trustee sells the non exempt property of the debtor and disburse the fund among the creditors. As the debtor pays back the creditors so it is different from other bankruptcy filings.
2. Chapter 9 bankruptcy: Chapter 9 protects the financially distressed municipality from its creditors. The court negotiates and formulates a plan for reorganizing its debts. The court either extends the debt maturities, lowers the principal balance or interest rate to reorganize the debts of a municipality.
3. Chapter 11 Bankruptcy: Chapter 11 bankruptcy is commonly known as the corporate bankruptcy or the reorganization bankruptcy. The business organizations file for bankruptcy when they are unable to repay to the creditors they file for chapter 11 Bankruptcy. The debts are reorganized and the assets in possession of the business organizations are sold to pay off a portion of the debts and remaining debt can be paid in accordance with their ability.
4. Chapter 12 bankruptcy: The debts are discharged to family farmers and fishermen with regular income under chapter 12 bankruptcy. The debtor proposes a repayment plan to the creditors therefore chapter 12 bankruptcy is similar to the chapter 13 bankruptcy. The court appointed trustee distributes the money to the creditors and under Chapter 12 a family farmer or fisherman will be allowed to continue to operate the business along with the repayment plan.
5. Chapter 13 Bankruptcy: The court appointed trustee designs a repayment plan for the debtor to pay off the debt. The court appointed trustee negotiates with the creditors to make it affordable to pay off. But the filer needs to have a stable income in order to file under chapter 13 bankruptcy.
6. Chapter 14 bankruptcy: Under this type of bankruptcy the creditors file bankruptcy appeal against their debtors. Usually, the corporate world is seen to file this rare type of bankruptcy.
You need to know the different types of bankruptcy as you need to take appropriate legal action according to your financial situation.