What Are the Differences between Bankruptcy Types?

Chapter 11 Bankruptcies pic
Chapter 11 Bankruptcies
Image: nolo.com

Nancy L. Kourland is a longtime lawyer in the New York City area. In the almost 30-year span she’s worked in law, Nancy L. Kourland has earned recognition as a bankruptcy litigator, focusing in large part on Chapter 11 bankruptcies.

In bankruptcy law, there are several different chapters for which you can file depending on who’s filing and the amount of debt. Chapter 7 bankruptcy is used by people and businesses with no disposable income to get rid of debt. Debtor most likely lose their property in liquidation. Chapter 13 bankruptcy applies to people with a regular income, and it is used to renegotiate the debt in order to pay it off over time. In this case, debtors may be able to keep their property. Chapter 12 is another type of bankruptcy that applies only to commercial fishing vessels and farmers.

Chapter 11 bankruptcy typically involves large business partnerships or corporations. A business that has a substantial amount of debt but wants to reorganize its debts to stay in business will usually file Chapter 11. Creditors would get paid over time, and the business is still active. Sometimes if the debt for a married couple is over a certain amount, a Chapter 11 bankruptcy might be filed. It is the most complicated of the choices, and fewer law firms handle Chapter 11 cases.

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