Bankruptcy is a legal process in which an individual or business can no longer pay its debts and seeks protection from creditors. In some countries, such as the United States, bankruptcy is governed by federal law while in other countries it may be regulated at the state level. Under U.S. Bankruptcy Code Title 11 (“Bankruptcy”), there are several types of bankruptcies depending on the needs of the debtor:
1) Chapter 7 – Liquidation for individuals and businesses that cannot repay their debt;
2) Chapter 9 – Reorganization for municipalities with excessive debt;
3) Chapter 11 – Reorganization for companies who wish to remain operational during bankruptcy proceedings;
4) Chapter 12 -Reorganization specifically designed for family farmers/fishermen suffering financial distress; and 5)Chapter 13- Repayment plans under court supervision over 3-5 years period for individuals with regular income but too much debt to qualify for Chapter 7 liquidation relief.
A successful reorganization plan must meet certain criteria set forth by applicable statutes, such as providing “fair and equitable” treatment to all classes of creditors—secured, unsecured priority claims holders and general unsecured claimants — allowing them equal access to recoveries proportional to their respective claim sizes if they accept proposed repayment terms laid out in a reorganizational plan confirmed by court order following creditor approval via voting process conducted through US Trustee offices nationwide . If approved , upon completion of payments due per confirmation order , remaining eligible dischargeable claims shall be discharged without further obligation owed thereby closing case without any balance due.
