Introduction to the U.S. Bankruptcy Code: Corporate, Institutional & Personal Bankruptcy

The United States Constitution authorizes Congress to enact “uniform Laws on the subject of Bankruptcies”, and in 1978 Congress enacted the Bankruptcy Code, which has been amended several times since. The bankruptcy process exists to give the “honest but unfortunate debtor” a fresh start. Chapter 7 bankruptcy and Chapter 13 bankruptcy are personal bankruptcy solutions.

Bankruptcy Cases, Including Chapter 7 and Chapter 13

There are five basic types of bankruptcy cases detailed in the Bankruptcy Code, commonly referred to by their chapter numbers in the Code:

	Chapter 7, Liquidation, is a court supervised process where a lawyer collects the debtor's non-exempt assets, liquidates them, and distributes the proceeds to the creditors. In most Chapter 7 cases the debtor has no nonexempt assets, so in these "no-asset cases" there are no assets to distribute. The debtor is normally discharged from all debts in a few months.
	Chapter 9, Adjustment of Debts of a Municipality, is used by municipalities such as cities, towns, counties, municipal utilities and school districts, to re-organize their debts, similar to a Chapter 11 filing.
	Chapter 11, Reorganization, is normally used by commercial organizations so that they can continue operating their business and repay creditors through a court approved reorganization plan.
	Chapter 12, Adjustment of Debts of a Family Farmer with Regular Income, provides relief to family farmers with regular income, and is similar to Chapter 13.
	Chapter 13, Adjustment of Debts of an Individual With Regular Income, was created for individuals with a regular source of income so that they can avoid Chapter 7 Liquidation bankruptcy and repay creditors over time, generally a three to five year period. Chapter 13 is often preferable to Chapter 7 if a debtor has a house or other asset they wish to retain, that would be lost in a Chapter 7 bankruptcy.

Corporate and institutional re-organizations and bankruptcies under Chapters 9 and 11 are complex, and are not dealt with on this web site.

www.california-bankruptcy.com focuses on personal bankruptcy solutions. Please follow the links below for more detail:

	Chapter 7 Bankruptcy Liquidation
	Chapter 13 Bankruptcy Adjustment of Debts of an Individual with Regular Income