What are the different types of bankruptcy and their eligibility requirements?
The U.S. Bankruptcy Code provides for the following types of bankruptcy filing: Chapter 7 — Liquidation — provides for the liquidation of a debtor’s assets by a trustee to raise cash to pay off creditors’ claims. The stages in a chapter 7 case are discussed below. Companies, as well as individuals, can file for chapter 7 (individual consumer debtors are subject to eligibility requirements, discussed below). Spouses can file a joint-case. The 2005 Amendments to the Bankruptcy Case have increased the complexity of individual consumer chapter 7 cases (discussed further below). Chapter 9 – Municipal Bankruptcy – provides a financially-distressed municipality protection from its creditors while it develops and negotiates a plan to adjust its debts. Chapter 11 – Reorganization – provides for reorganization of a debtor under a reorganization plan that is voted on by the debtor’s creditors. However, it is possible for a business debtor to liquidate its assets in chapter 11 under a “liquidati
