The Different Types of Bankruptcies

If you have made the decision that bankruptcy is the right solution for your financial situation, you will need to decide which type of bankruptcy is most beneficial. Although it is not common knowledge, there are more than six different types of bankruptcy. Each type of bankruptcy is identified by the chapter of the Code that describes the code. Liquidation is the most frequently filed bankruptcy.

  • Liquidation Bankruptcy. Liquidation is usually referred to as a “fresh start”. It is the most popular filed bankruptcy because if an individual owes more than they can produce or earn in the foreseeable future, Chapter 7 (liquidation) is their best bet. By doing so, the individual’s ’assets can be used to reduce their remaining debts. Once this is done, bankruptcy is usually classified as dismissed.
  • Adjustment of Debts of a Municipality Bankruptcy. An obscure and typically less common bankruptcy called adjustment of debts of a municipality only applies to towns, cities, and counties. In order to file for Chapter 9 bankruptcy, the municipality needs to be authorized under their state law to do so, are not able to reduce its current debts, adjust its debts, and retrieve agreements from the majority of its creditors.
  • Reorganization of Business Bankruptcy. Chapter 11 business reorganization bankruptcy grants businesses the opportunity to rearrange their debt by reducing unwanted debts. However, they must maintain the debts that are necessary in order for them to continue business operations. This bankruptcy is usually used by corporate businesses that are struggling financially.
  • Adjustment of Debts of a Family Farmer or Fisherman Bankruptcy. Just like the title states, Chapter 12 bankruptcy is for individuals who are strictly fishermen or family farmers. Although it is strikingly similar to Chapter 13 bankruptcy, it comes with added benefits. For example, it allows for the farmer/fisherman to continue their operations without having their entire business crumble.
  • Reorganization of an Individual Bankruptcy. Like Chapter 11 and 12, this bankruptcy allows individuals to reorganize their debt by reducing and eliminating unwanted debts with a few restrictions. Chapter 13, individual reorganization bankruptcy, often is pegged as the wage earner bankruptcy because individuals must have a stable source of income in order to file for it. Their debts are then rearranged into a plan which allows the them to pay over a few years period, while they maintain control and ownership of their own assets.
  • Ancillary Bankruptcy. Because it is only used as an ancillary case to international business bankruptcies, Chapter 15 bankruptcy allows foreign bankruptcy earnings to have access to the U.S. Bankruptcy Courts.

Contact a Bankruptcy Attorney today.

An ethical Memphis, TN bankruptcy lawyer will let you know if bankruptcy is truly the best option for you. If it is not he or she should be willing to suggest alternate options, such as debt management or debt resolution. Filing for bankruptcy is an important decision and should not be taken lightly. Visiting with several qualified bankruptcy lawyers is a crucial part of the bankruptcy process. A skilled and reputable lawyer can help you file the paperwork, get creditors off your back and speed up the entire process. Do not wait to hire legal representation for your bankruptcy. Call a skilled bankruptcy lawyer today to schedule a consultation. Many bankruptcy lawyers offer free initial consultations, so you do not have anything to lose by speaking to one.

Thank to our friends and contributors from Darrell Castle & Associates, PLLC for their knowledge on bankruptcy.