Lesser Known Types of Bankruptcy
Most people are familiar with the concept of filing for bankruptcy. And many people understand that there are different types of bankruptcy for businesses and individuals. The most common types of bankruptcy — and the ones with which most people are familiar — are Chapter 7, Chapter 11 and Chapter 13. But many people are not aware of their lesser-known cousins: Chapter 9, Chapter 12 and Chapter 15.
Chapter 9 bankruptcy applies to municipalities — cities, counties and townships — that have become financially insolvent. While many states have established remedies for financially distressed municipalities under state law, the Bankruptcy Code also provides for Chapter 9 so long as it is in the best interests of the municipality’s creditors. While the economic downturn has led to a recent uptick in Chapter 9 filings, they are still fairly rare due to the presence of alternatives under state law as well as the strict requirements.
Chapter 12 bankruptcy provides debt relief to family farms and fishing operations. Chapter 12 operates similarly to Chapter 13 bankruptcy in that there is a payment plan and the petitioner is allowed to retain most of his or her assets so long as he or she adheres to the plan and makes scheduled payments to the trustee.
Chapter 15 was added to the Bankruptcy Code in 2005 by the Bankruptcy Abuse Prevention and Consumer Protection Act and is based on model provisions established by the United Nations Commission on International Trade Law (UNCITRAL). It applies to bankruptcy cases that involve assets and creditors in multiple national jurisdictions. The aim of Chapter 15 is to allow a U.S. bankruptcy court to coordinate with bankruptcy proceedings in other countries.