Bankruptcy is a legal process to ensure the satisfaction of debt and the ability of entities to continue their livelihood. There are four main sides to any bankruptcy case: debtor(s), creditor(s), trustee, and the court. Each side adds an equivalent part to bring on a whole speedy process to the case.  Click on the informative Understanding Bankruptcy graph below for an explanation of terms.

CREDITOR:
Definition
Garnishment
Liens
Mortgages
DEBTOR:
Definition
Rights and Duties
Protection
TRUSTEE:
Definition
Bankruptcy Trustee
Qualifications
Duties
THE COURT:
Definition
Official Forms
Bankruptcy Types

Types of Bankruptcies

 

Bankruptcy is a legal vehicle created to provide relief debtors from debt and to insure creditors' rights.

Bankruptcy can be either voluntary (filed by debtors) or involuntary (filed by creditors). Both forms require the filer to complete official forms, certify the information, and file notice with the court stating all known contact information for the other party. For debtors, they will need to complete a matrix of creditors showing the name and official known address of doing business.

The United Congress created different chapters for bankruptcy to ease the process and make it much faster. Here is a list of the major types of bankruptcies relating to both individual and business:

  • Chapter 7 – Known as a liquidation process. Chapter 7 offers new beginning for debtors, individuals or small businesses. Chapter 7 protects against constant harassment from creditors and directs all inquiries and findings to certain meetings between debtor and creditor attended by the trustee. Debtors must pass a mean test to qualify (numbers are based on income levels from each state). All qualifying debt will be discharged as a result.

  • Chapter 11 – Known as reorganization, Chapter 11 is almost strictly for multi-million dollar corporations. Chapter 11 is designed to provide businesses with time and room to rework their debt obligation and try to create new sources for funding. All actions are monitored by the court and creditors file injunction against changes.

  • Chapter 13 – Known as repayment plan for the wage earner. Chapter 13 requires debtors to provide proof of creditable income sources. A trustee is assigned to monitor the debtor and any changes regarding income levels. If the debtor wants to protect a collateral attached to a security note, the debtor must show income to sustain payment of the note, payment for the repayment plan and enough funds left over to cover day to day expenses (such as rent and food).
    • How will Chapter 7 affect my life?
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    Government Bankruptcy Resources


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    What Documents Do I Need To File For Bankruptcy?


    We want your bankruptcy to go as smoothly as possible. See what documents you should have prepared.  Read more