Generally, a chapter 15 case is ancillary to a primary proceeding brought in another country, typically the debtor’s home country. As an alternative, the debtor or a creditor may commence a full chapter 7 or chapter 11 case in the United States if the assets in the United States are sufficiently complex to merit a full-blown domestic bankruptcy case. 11 U.S.C. § 1520(c). In addition, under chapter 15 a U.S. court may authorize a trustee or other entity (including an examiner) to act in a foreign country on behalf of a U.S. bankruptcy estate. 11 U.S.C. § 1505.
Most people are aware that there are two types of bankruptcy: Chapter 7 and Chapter 13.
Chapter 7 is the simple discharge of unsecured debts, like credit cards, personal loans, payday loans, medical bills, delinquent utility bills, and civil judgments. To be eligible for Chapter 7, a person must simply not have filed a prior Chapter 7 bankruptcy in the past 8 years (or a prior Chapter 13 in the past 6 years*), and have no disposable income available for unsecured creditors.
Virtually anyone can qualify for Chapter 13, which is essentially debt consolidation, restructuring, and repayment. Even people not eligible for a discharge can file Chapter 13. Anything that might disqualify you or present a problem in Chapter 7 can be mitigated in Chapter 13, such as too much income, too much equity in assets, prior bankruptcy cases, gambling losses, preferential or insider payments, recently-incurred debt, fraudulently-incurred debt, and transfers of assets. Chapter 13 can also cure arrears on secured loans like mortgages and auto loans, and help you prevent repossession and foreclosure. Chapter 13 also allows for repayments of debts that are non-dischargeable in Chapter 7, such as student loans, taxes, and child support.
But did you know there are four more chapters of bankruptcy?
Although this information may not be entirely relevant or useful, I have found many clients are curious to know about the other chapters, so today, I thought I would share this bit of trivia. Before I continue, I want to point out that Holbus Law Office does not handle any of these other types of bankruptcy cases. What follows are boiled down summaries from the official U.S. Courts website with certain key differences from Chapter 7 / Chapter 13 highlighted for comparison purposes. If you need further information about any of these alternate chapters, please consult with an attorney specializing in these areas.
This would be the next best known form of bankruptcy, and the one you hear most often about in the news. Chapter 11 is typically ‘bankruptcy for businesses’. You’ve seen them in the news – particularly with the airline and auto industries over the past two decades. Specifically, Chapter 11 is reorganization and repayment (like Chapter 13) for businesses who need to restructure their debts but wish to continue to operate. Business entities are not eligible to be debtors in Chapter 13, so Chapter 11 is their only refuge. However, individuals can be debtors in Chapter 11. Why would an individual file Chapter 11? The only reason I can think of is that they have too much debt. There are limitations on how much debt you can have in Chapter 13 (very few people fall in this category).
It is worth noting that businesses can file under Chapter 7 if the business intends to fold. I am of the opinion that most businesses do not need to file under Chapter 7 (though their owners may need to file one personally) because the termination of the business is akin to death of an individual. Chapter 7 is somewhat redundant. However, there may be benefits to a business filing under Chapter 7 as a matter of asset distribution, tax consequences, and protecting certain liabilities of the owners. So speak to a business and/or tax attorney before making a decision here.
Unlike 7/13, most Chapter 11 bankruptcy cases do not have a trustee. In most cases, the debtor becomes debtor-in-possession, and continues to operate the business and perform many of the functions of the trustee.
In the Chapter 11 reorganization plan, the debtor groups and classifies debts and proposes repayment terms. Any creditor whose claim is proposed to be paid differently than what is required under the contract must vote by ballot on confirmation of the plan.
The U.S. Trustee appoints a creditor committee – ordinarily consisting of the creditors holding the 7 largest unsecured claims. The committee performs an oversight function on the debtor in possession, and collaborates on the formulation of the plan.
Chapter 12 bankruptcy is designed for family farmers or family fishermen. In a lot of ways, it is very similar to Chapter 13, but offers much greater flexibility to farmers and fisherman, who often have seasonal income and greater debt associated with their operations. To qualify, the debtors must be engaged in farming operations or commercial fishing operations; said operations must compose at least 50% of the debtors’ income in the preceding tax years, and exclusive of a home mortgage, at least 50% of the debts must be attributable to farming or 80% to fishing.
I don’t want to go into too much detail here, because anyone reading this who is actually interested in this particular chapter already has an attorney on payroll to consult with. Chapter 9 bankruptcy is for municipalities (cities, villages, towns, counties, school districts, etc.).
This chapter is new with the introduction of BAPCPA in 2005, and strives to coordinate with bankruptcy cases that reach across national borders.
Finally, I wanted to address one other quirky aspect. Those of you who have filed for bankruptcy and actually looked at the papers closely have probably noticed that the top of the first page of the packet of forms contains the words “Voluntary Petition”, which begs the question: is there an Involuntary Petition?
Yes there is. You can read the details at 11 U.S.C. § 303. The involuntary petition does not result in automatic bankruptcy, but does invoke an automatic stay. If there are more than 12 qualified creditors, at least 3 must join in the petition. Fewer than 12 qualified creditors, only one must file. The debtor must also generally not be paying their debts as they come contractually due. Bankruptcy cases such as these are extremely rare, and typically only invoked when fraud is strongly suspected. Source: http://bankruptcy.cooley.com/2012/05/articles/business-bankruptcy-issues/forced-into-bankruptcy-the-involuntary-bankruptcy-process/