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What are the different chapters under which an individual can file?
There are three different chapters of the Bankruptcy Code under which
an individual can file, and they are called Chapter 7, Chapter 11, and
Chapter 13. A Chapter 7 case is sometimes called a "straight"
bankruptcy, or a "liquidation." In Chapter 7, a court-appointed trustee
sells your non-exempt assets and distributes the proceeds amongst your
creditors.
In Chapter 13, you file a plan that obligates you to
pay some or all of your debts over a multiyear period. Under the new
bankruptcy law, many consumer debtors will be required to file a
Chapter 13 bankruptcy and commit to a 5-year repayment schedule.
Chapter
11 is primarily used by businesses that need to reorganize in order to
get out from under debt, but is also theoretically available to
consumer debtors. (K-Mart and WorldCom are examples of two "big" names
who have filed under Chapter 11.) In chapter 11, the debtor proposes a
plan for paying some or all of his debts, and his creditors get a
chance to vote on whether to accept or reject that plan. In some cases,
it may be possible to "cram down" a plan against a dissenting class of
creditors. Chapter 11 may be the only recourse for a consumer debtor
with an extremely large mortgage that causes his secured debt to exceed
the limit for Chapter 13.
A special chapter - Chapter 12 - is
available to family farmers and under the new bankruptcy law now covers
family fishermen. It was very similar to chapter 13, but without limits
on the amount of debts. The new bankruptcy law made significant changes
in Chapter 12.
(Reviewed 11.14.08)
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