Types of Bankruptcy
There are two main classifications of bankruptcy cases – liquidation and reorganization. This holds true for both corporate and personal bankruptcies. A chapter 7 bankruptcy is a total liquidation process and both individuals and corporations can file for protection under chapter 7 of the United States Bankruptcy Code. A petition to file for a Chapter 12 (family farmers/fishermen) Chapter 13 (personal) or Chapter 11 (corporate) bankruptcy would be considered reorganization. Individuals or corporations repay a portion of their debt in set monthly payments for a pre-determined amount of time and in exchange have the remaining portion of that debt discharged at the culmination of their payment plan.
There are certain criteria that individuals and corporations must meet in order to file for a chapter 7 bankruptcy. The bankruptcy code was changed in 2005 making it more difficult to receive protection under chapter of the United States Bankruptcy Code. Visit our section on Chapter 7 bankruptcy for more information.
A chapter 13 (personal reorganization) bankruptcy is becoming more common since the law changed in 2005. To find out if a chapter 13 bankruptcy is right for you please read our section on Chapter 13 bankruptcy.
A chapter 11 (corporate reorganization) bankruptcy holds many benefits for a company. If the company feels that it can continue to do business but just needs financial assistance in the interim they are able to file for chapter 11 bankruptcy and keep their company running on a day-to-day basis. If the company fails at its attempt to reorganize under chapter 11 of the bankruptcy code then it can be liquidated under chapter 7 guidelines.
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