Types of Bankruptcy Filings

Chapter 7

Chapter 7 is designed for individuals, corporations and partnerships in financial difficulty who do not have the ability to pay their existing debts. Under chapter 7 a trustee takes possession of all the debtor's non-exempt property, liquidates it for cash and uses the proceeds to pay creditors according to priorities of the Bankruptcy Code. In Washington, the debtor may elect all the state exemptions or alternatively all the federal exemptions. In Oregon, only state exemptions may be used.

Chapter 9

Chapter 9 is designed to allow a municipality to continue operating while it works out a repayment plan for its creditors. A municipal unit cannot liquidate its assets to satisfy its debts.

Bridge over bankruptcy

Chapter 11

Chapter 11 allows a business to reorganize and restructure its finances so that it may continue to operate, provide employees with jobs, pay its creditors, and produce a return for its owners. While chapter 11 is primarily designed for a business it is also available to individuals. In a chapter 11 case the debtor proposes a plan to creditors which, if accepted by the creditors and approved by the court, will allow a debtor to reorganize. A debtor may also propose a plan of liquidation and cease doing business.

Chapter 12

Chapter 12 allows family farmers and fishermen with financial difficulties to repay debts over a period of time from future earnings. In many ways it is similar to a chapter 13 case. The eligibility requirements are restrictive, limiting its use to those whose income arises primarily from a family-owned farm.

Chapter 13

Chapter 13 enables individuals with regular incomes, under court supervision and protection, to repay their debts over an extended period of time according to a plan. The plan may call for full or partial repayment. The Bush Administration amended bankruptcy laws to attempt to make Chapter 13 the primary route for consumers. The changes made bankruptcy more difficult for consumers and more favorable for credit card companies.

Chapter 15

Chapter 15 expands the scope of bankruptcy law to deal with cases of cross-border insolvency. It provides for cooperation between U.S. courts, trustees and debtors and their foreign counterparts. Chapter 15 prescribes guidelines for access of foreign representatives and creditors to Federal and State courts; the recognition of a foreign proceeding, and relief.