There are several roles in bankruptcy proceedings that may change slightly depending upon the type of bankruptcy relief sought – but the major players are almost always the same. The details, filing application, and process differ whether you are looking to file a:
- Chapter 7– In a bankruptcy case under Chapter 7, you file a petition asking the court to discharge your debts. Chapter 7 bankruptcy is typically referred to as liquidation bankruptcy, even though most individuals that file bankruptcy Chapter 7 don’t even end up losing anything. However, in cases of Chapter 7, your possessions may be sold in order to pay existing debts. This type of bankruptcy is intended for consumers or households with a limited income.
- Chapter 11– A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. Filing for bankruptcy Chapter 11 allows businesses and their owners the opportunity to seek financial relief, allowing for the reorganization and restructuring of a company’s original payment terms over a payment plan. It is intended for a corporation or partnership.
- Chapter 12– (or Agriculture Bankruptcy) designed for agricultural (farming or fishing corporations) who cannot repay debts. It was enacted in the 1980s for farmers facing agricultural crisis as the other bankruptcy filings were not appropriate. This type of filing gives farmers a chance to reorganize their debt and retain their land.
- Chapter 13– For those who earn a significant income and want to protect valuable property and assets, like a home or car. Under this repayment plan, your debts are reorganized, your assets are not liquidated, and creditors are forbidden to continue their collection efforts, allowing you relief and the chance to prioritize and pay your debts.
Common Terms and Phrases in Bankruptcy Proceedings
To stay abreast of your bankruptcy proceedings and to understand the terms that are coming your way, we’ve listed some of the major terms you may come across below.
Debtor: A debtor can be an individual, a business/corporation, or even a municipality (such as a city or county). The debtor borrowed money or incurred an obligation which is owed (or alleged to be owed) to creditors. When you file a bankruptcy, you will then be referred to as a debtor for the remaining duration of the filing process.
Creditor: An entity to which a debt or obligation is owed (or alleged to be owed). There are two types of creditors: (1) a secured creditor, to which collateral or property was pledged (such as a mortgage on a house or a car loan); and (2) an unsecured creditor, to which a loan or obligation was given and no collateral was offered (such as a credit card or medical bill).
Trustee: An individual appointed by, in North Carolina, the Bankruptcy Administrator’s Office to: (1) gather property not exempt from bankruptcy, (2) manage the funds from the sale of that property, (3) pay certain administrative expenses, and (4) distribute the remaining balance to the creditors. The Trustee receives non-exempt property from either the liquidation of assets, or monthly payments from the debtor’s post-petition earnings, depending upon the type of bankruptcy filed.
Bankruptcy Administrator: An individual appointed to oversee the administration of all bankruptcy cases that are filed. North Carolina uses Bankruptcy Administrators, while most other states use United States Trustees, although their roles and responsibilities are nearly identical. The Bankruptcy Administrator ensures that the bankruptcy system is running smoothly and efficiently.
Equity Holders: In corporate bankruptcy cases, equity holders are often the stockholders, otherwise known as equity security holders. They can be anyone who has a stake in the ownership of a company. A shareholder is one example of an equity holder.
Bankruptcy Judge: A bankruptcy judge is the individual who presides over the case and resolves disputes. They are a judicial officer of a United States district court, and are appointed by the majority of judges of the U.S. court of appeals to which his or her specific district court is attached. Bankruptcy judges have the authority to exercise jurisdiction over all bankruptcy matters.
While these are not the only players you should expect to be involved in bankruptcy proceedings, they are involved in the majority of cases. For more information on bankruptcy proceedings and to see what type of Chapter is the best for you, view our bankruptcy law services or speak to an experienced bankruptcy law attorney today!