Chapter 7: Also known as liquidation,
allows individuals or businesses to give up
nonexempt assets and walk away from most debts. To
qualify, debtors must pass the means test -- that
is, their income must be less than their state's
median income.
Chapter 9: This section works like
Chapter 11 and allows municipalities to reorganize
debt.
Chapter 11: Also known as
reorganization, this type of bankruptcy is for
individuals, and more commonly, businesses to
restructure debt. Similar to Chapter 13, in that it
allows the filer to draft a plan to repay some debt
while retaining assets. Chapter 11 is much more
complicated, and therefore expensive, making it
financially feasible mainly for businesses and very
wealthy individuals.
Chapter 12: Allows family farmers and
fishermen with regular income to reorganize debt. It
works very much like Chapter 13, but usually
stretches out over three years.
Chapter 13: For individuals who need to
restructure their debt load. Some creditors will be
paid back in full with interest, others in full and
the remainder will be repaid a percentage of the
debt. Also used by creditors who do not qualify for
Chapter 7 under the means test.
Provisions in the new
bankruptcy law mandate credit counseling before
a bankruptcy can be filed and a personal financial
management seminar before a bankruptcy is complete.
The law went into effect October 17, 2005.
If you’re experiencing financial problems,
strongly consider
Credit Counseling
or
Credit Consolidation. These are
companies that offer financial education and
counseling services which will help you get your
finances in order, pay down your debt, and reach
your goals all at no charge to you.
