The laws governing bankruptcy are complex and subject to review by a series of authorities. This overview discusses several types of bankruptcies in brief. For more detailed advice, you should consult an attorney with experience in bankruptcy law.
Bankruptcies are often referred to by the chapter of the United States Code where they are. Bankruptcy proceedings are covered in Title 11 of the U.S. Code, and different Chapters within that title lay out the legal rules for different types of bankruptcy.
- Chapter 12. This is a type of bankruptcy that is specifically tailored to farms. It was originally created as a temporary measure during the farm crisis of the 1980s, but was made a permanent part of the Bankruptcy Code in 2005. These procedures are designed to help farmers restructure their debts while keeping their land. It is less time-consuming than Chapter 11, less harsh than Chapter 7, and addresses long-term problems that Chapter 13 does not. A trustee owns the debtor’s assets once bankruptcy is declared, but the debtor is allowed to remain in possession of all assets as long as certain duties are fulfilled.
- Chapter 7. This is a liquidation bankruptcy. In a Chapter 7 bankruptcy, all of the debtor’s assets are gathered and distributed between the creditors. Some property remains exempt under bankruptcy regulations. Once assets have been distributed, the debts are discharged and the debtor can start fresh. As with other bankruptcies, certain debts cannot be discharged through Chapter 7 bankruptcy. These include alimony, student loans, taxes, and legally awarded damages. In addition, actions such as fraud, concealment of assets, or other attempts to circumvent the law or evade the terms of the bankruptcy can bar debtors from using bankruptcy proceedings to clear their debts.
- Chapter 9 bankruptcies allow municipalities to discharge debts through bankruptcy. This could be applicable when agricultural government entities like an irrigation district require bankruptcy.
- Chapter 11. A Chapter 11 or “reorganization” bankruptcy can be used by an individual but is often used by businesses that want to continue operations during and after the bankruptcy. A trustee is appointed and assigned legal ownership, but the debtor maintains physical control of their assets.
- Chapter 13. This bankruptcy proceeding is used by individuals.
As noted in the note on Chapter 7 bankruptcies, not all debts can be discharged through bankruptcy and some actions can bar debtors from bankruptcy relief. Before deciding on a bankruptcy and selecting the process you wish to use, you should consult with an attorney with experience in bankruptcy law. This will help you to protect your legal rights and make the most of the opportunity which bankruptcy represents.