There are several types of Bankruptcy available for individuals, businesses and even governmental entities facing financial problems. Each type is identified by a Chapter number, based on its chapter in the Bankruptcy Code. This website primarily discusses individual (or consumer) Bankruptcy cases, which are primarily Chapter 7 and Chapter 13, and small business cases that can be either Chapter 7 or Chapter 11. Occasionally, individuals may also file Chapter 11 or Chapter 12 cases. Below is a list of the different types of Bankruptcy, with a brief description of each.
- Chapter 7 — Chapter 7 Bankruptcy, sometimes called “liquidation” or “straight Bankruptcy,” can be filed by individuals or businesses. It is usually the quickest case, as there is no payment plan and a discharge of most debts is entered in a few months. A Chapter 7 Trustee is appointed for all cases, and will review the case to see if assets are available to pay something to creditors. Although it is possible that the Trustee may sell some property to get money for creditors, in reality most individuals filing Chapter 7 never lose any property whatsoever to the Trustee. Chapter 7 is usually the best option for individuals who qualify as it allows them to get a discharge of most or all of their debt and move on with their lives much sooner than Chapter 13.
- Chapter 11 — Chapter 11, or “reorganization,” is typically filed by businesses but is is also available for individuals. Small family businesses, and some of the largest companies in the United States (such as airlines, automakers, etc.) can file Chapter 11. Individuals and couples who file Chapter 11 are typically people with significant assets or income who may not qualify for Chapter 13 and do not want to liquidate their assets in a Chapter 7 case. Chapter 11 is the most complicated, and most expensive, case filed by individuals but a Chapter 11 can more than pay for itself when compared to other options.
- Chapter 13 — Chapter 13 Bankruptcy is only available for individuals (or married couples), and not business entities. Unlike Chapter 7, Chapter 13 involves a payment plan usually lasting between three to five years. Individuals who do not qualify for a Chapter 7 normally have to file a Chapter 13. However, there are some advantages to Chapter 13, including the ability to keep non-exempt property, make up past-due mortgage payments, strip unsecured junior liens from a home, and to get a discharge of some debts that would not be discharged in a Chapter 7 case. The Chapter 13 case and plan are overseen by the Chapter 13 Trustee.
Some of the lesser known Chapters are:
- Chapter 9 — Chapter 9 is available for municipalities and other governmental entities such as hospital and school districts. Most recently, the city of Detroit filed a Chapter 9 case in July 2013. A list of other entities who have filed Chapter 9 is available here.
- Chapter 12 — Chapter 12, or “Family Farmers and Fisherman Bankruptcy,” is available for individuals or businesses who get most of their income from farming, agricultural operations, or fishing and who do not exceed debt limits. Chapter 12 is somewhat similar to Chapters 11 and 13 in that it involves a payment plan over several years. Chapter 12 is somewhat unusual in Georgia, but in reality there are many individuals and families in Georgia who could benefit from a Chapter 12 rather than the other available chapters.
- Chapter 15 — Added to the Bankruptcy Code in 2005, Chapter 15 Bankruptcy deals with “ancillary” and “cross-border” cases. While Chapter 15 is beyond the scope of this site, more information can be found at the United States Courts website.