Types of Bankruptcies (Understanding Each Chapter Bankruptcy)

Bankruptcy is governed only by federal law. The federal laws of the United States are “codified” within books of various groups, almost like volumes, with each volume receiving a numerical title. For example, Veterans' Benefits are addressed in Title 38 of the U.S. Code, whereas Title 17 addresses Copyrights. Bankruptcy is found in Title 11 of the U.S. Code, as are the different chapters of this type of debt relief. Here are the types of bankruptcy addressed by Title 11 that our Greensboro, NC law firm of Ivey McClellan often helps clients individual and corporate clients file.

What Each Chapter Bankruptcy Is in NC

While Chapters 7, 11, and 13 are the types of bankruptcies most often spoken about, they're certainly not the only ones that exist. There are actually at least a dozen different chapters of bankruptcy which include:

• Chapters 1, 3, and 5 of the Bankruptcy Code address generic issues and operations within all of the bankruptcy law, including definitions, how trustees are selected, as well as who files claims in these cases and when to name a few. These three types of bankruptcies that a Greensboro resident or company can file largely outline how a bankruptcy proceeding works.
• Chapter 7 bankruptcy involves the basic liquidation of assets for both individuals and businesses. It is the simplest and/or quickest form of bankruptcy. It involves the liquidation of non-exempt assets by a trustee, with the goal of obtaining a discharge, which acts as a legally binding document absolving the individual from having to pay back any debts that were not repaid from the liquidation of assets. However, there are certain exceptions to these general rules. Credit card bills, medical bills, and other types of unsecured debt may be discharged for qualifying Greensboro bankruptcy debtors.
• Chapter 9 bankruptcy can provide Greater Piedmont Triad and other North Carolina municipalities protection from creditors while developing a plan to resolve outstanding debts. For example, Detroit, Michigan, filed this type of bankruptcy on July 18, 2013. Municipalities can include counties, school districts, cities, and even taxing districts. Municipalities must work to negotiate a repayment plan instead of liquidating all assets to repay lenders. A successful bankruptcy filing of this sort may reduce the amount of debt owed, refinance debts through a new loan, or extend debt repayment deadlines.
• Chapter 11 bankruptcy allows financial reorganization and restructuring of businesses or corporations. It is sometimes used by individuals with substantial debts. This type of bankruptcy allows a Greensboro company to continue doing business while adhering to a debt repayment plan, or “Plan of Reorganization,” agreed upon by the bankruptcy court. Most often, this debt repayment plan involves repayment of some, but not all, of the indebtedness owed by the company over a period of a few years, based upon the company’s ability to pay. The Plan of Reorganization is unique and molded to the needs of the North Carolina debtor in that case.
• Chapter 12 bankruptcy pertains to the rehabilitation of debts for family farmers and fishermen with regular annual income. In such cases, filing a petition stops collection actions by creditors. Debtors who file Chapter 12 in Greensboro, NC, then propose a repayment plan to repay creditors over the following three to five years. Longer repayment periods may be granted by the U.S. Bankruptcy Courts with proper cause. Debtors must also attend a “meeting of the creditors” to discuss financial assets and the repayment plan with the lenders under oath. A trustee is appointed to evaluate and oversee the case, collect payments from the debtor, and disburse payments to creditors.
• Chapter 13 bankruptcy concerns itself with the rehabilitation of debts for individuals with a source of regular income. This type of bankruptcy allows for the development of a repayment plan to repay all or part of the debts owed over a three to 5-year time period. This repayment plan is overseen by a Greensboro trustee. The ultimate goal of this filing is to receive a discharge, which acts as a legally binding document absolving the individual from having to pay back any debts that were not repaid (in whole or in part) in the plan. Chapter 13 has certain advantages over a Greensboro Chapter 7 filing in that it can discharge certain excepted in the latter type of case.
• Chapter 15 bankruptcy adopts the Model Law of Cross Border Insolvency from the United Nations to provide a mechanism for addressing “cross-border” or ancillary insolvency, or debtors of foreign countries, to resolve debts owed to creditors in the U.S. Corporations in countries other than the United States may have bankruptcy cases that involve U.S. assets. This type of bankruptcy allows for foreign bankruptcy proceedings to access the U.S. Bankruptcy Courts in order to reach resolutions.
• Chapters 8, 10, and 14 bankruptcies are not published within the U.S. Bankruptcy Code and were reserved for Congress to use as needed in the future. 

Deciding on the Best Type of Bankruptcy for You in North Carolina

If you live in or around Greensboro, North Carolina, whether that's our bigger cities like Winston-Salem, High Point, Burlington, or small ones like Archdate, Eden, Asheboro, or anywhere in between and are contemplating filing for bankruptcy, schedule your free consultation with one of our Ivey McClellan attorneys to discuss your financial situation and whether this form of debt relief is right for you.