At Behm Law Group, Ltd., we provide comprehensive legal guidance and protection for individual consumers filing for Chapter 7 or Chapter 13 bankruptcy, and for family farmers and fishers filing for Chapter 12 bankruptcy. If you’re considering filing for bankruptcy, our attorneys can help you determine which chapter will be the most effective for handling your current financial circumstances.
Each chapter is designed to help individuals in many different situations get out of debt that they wouldn’t have otherwise been able to repay. While we work with only those three chapters (7, 12, and 13) of bankruptcy in Mankato, MN and the surrounding area, there are other types of bankruptcy available to individuals and businesses.
The six general bankruptcy chapters in U.S. bankruptcy law include:
- Chapter 7: Available to individuals and businesses alike, Chapter 7 bankruptcy is the most commonly filed chapter. It works to liquidate or sell the filer’s non-exempt assets, distribute the proceeds among the filer’s creditors, and discharge the majority of the filer’s debts. Chapter 7 is also called liquidation or straight bankruptcy. The bankruptcy exemptions under Minnesota state law and the bankruptcy code that are used to protect one’s property are very generous, however. In the vast majority of cases, no property is liquidated or sold at all and all that one loses are one’s debts.
- Chapter 9: This bankruptcy chapter is an option only available to municipalities such as cities, school districts, or counties. In 2013, Detroit, MI used Chapter 9 to file the largest municipal bankruptcy case in U.S. history, with debt load estimated at $18 to $20 billion. The process of Chapter 9 bankruptcy works to protect the filer from creditors while the filer restructures their debts to much more favorable repayment terms.
- Chapter 11: Like Chapter 9, Chapter 11 also protects the filer from creditors as they reorganize their debts. Chapter 11 is a process only offered to businesses that are not sole proprietorships and individuals, such as doctors, lawyers, famous actors, corporate CEOs, etc. who have total debts that exceed the debt limitations of Chapter 12 and Chapter 13 bankruptcy or who have incomes that far exceed the state median/average income for a household of their similar size. The goal of Chapter 11 is to help a business or an individual restructure their debts under more favorable repayment terms in a Chapter 11 repayment plan while they maintain operations. Some of the most recent large Chapter 11 cases include J.C. Penny, Hertz, and Neiman Marcus.
- Chapter 12: For filers that generate the majority of their annual income from family owned farming or fishing operations, Chapter 12 is a debt restructuring option. The restructured debts are put into a Chapter 12 plan lasting three to five years. This chapter is reserved for family farmers and fishers largely because their income is received seasonally.
- Chapter 13: The second most common individual consumer chapter filed is Chapter 13. This process works to restructure the filer’s debts into a manageable repayment plan that lasts a three to five-years. Some secured creditors (creditors with collateral or security such as vehicle lenders) are paid in full under more favorable repayment terms and some unsecured creditors (creditors who don’t have security or collateral such as credit card debts, medical debts, etc.) are repaid only partially with no interest and have their claims completely discharged. Chapter 13 is also called reorganization, restructuring, debt repayment, or wage-earner bankruptcy.
- Chapter 15: Finally, Chapter 15 bankruptcy is relatively rare, but still necessary. Added to the bankruptcy code in 2005, Chapter 15 bankruptcy handles filers with foreign debts and/or foreign assets. Chapter 15 overall works to negotiate a case with foreign courts and foreign bankruptcy/insolvency laws.