What are the different types of bankruptcy?
Bankruptcy is a legal process that allows individuals and businesses to get relief from their debts by either restructuring them or discharging them completely. Bankruptcy is governed by federal law and provides a wide range of options for creditors and debtors. In California, debtors and creditors are subject to the same protections under the law, regardless of the type of bankruptcy chosen. The most common types of bankruptcy are Chapter 7, Chapter 11, and Chapter 13. Chapter 7 is a liquidation bankruptcy, which means that the debtor’s assets are sold off to pay back creditors. This type of bankruptcy usually requires a total discharge of debts. Chapter 11 is a restructuring of debts, allowing the debtor to keep certain assets while still paying off their creditors. Chapter 13 is a repayment plan, in which the debtor can keep some assets while paying creditors in installments. Another type of bankruptcy is Chapter 12, which is primarily used by family farmers. This type of bankruptcy involves a reorganization plan that allows family farmers to continue to operate their business while paying off their debts. Finally, there is Chapter 9 bankruptcy, which is for municipalities and involves reorganizing the financial obligations of a city, town, or other public entity. This type of bankruptcy is not available to individuals and businesses. Overall, there are a variety of types of bankruptcy available to individuals and businesses in California, each providing different types of protection to creditors and debtors. Understanding which type of bankruptcy is most suitable for an individual or business is important and should be discussed with a bankruptcy lawyer.
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