Bankruptcy in the United States

Bankruptcy chapters

There are six types of bankruptcy under the Bankruptcy Code, located at Title 11 of the United States Code:

Chapter 7 (a liquidation-style case for individuals or businesses),

Chapter 9 (Municipal bankruptcy)

Chapter 11 (a more complex rehabilitation-style case used primarily by business debtors, but sometimes by individuals with substantial debts and assets)

Chapter 12 (a payment plan or rehabilitation-style case for family farmers and fishermen)

Chapter 13 (a payment plan or rehabilitation-style case for individuals with a regular source of income)

Chapter 15 (ancillary and other cross-border cases)

The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter 13.

The Bankruptcy Estate

Upon commencement of a bankruptcy, a bankruptcy estate is created. The bankruptcy estate (sometimes called "the estate") is a legal entity separate and distinct from the debtor, the creditors, or the trustee. Because the estate is not a real person, a trustee is appointed by the office of the U.S. Trustee to represent the estate and to make decisions on its behalf. It is not strictly correct to say that the trustee represents the creditors, though the creditors often benefit from actions by the trustee. With few exceptions, all the assets of the debtor transfer to the estate when the petition is filed. Exceptions to this rule include property to which the debtor holds only legal (as opposed to equitable) title. The estate also owns certain property acquired by the debtor within 180 days, including property received by inheritance or devise or as the result of a divorce judgment or a marital settlement agreement. In some circumstances, the trustee has the right to recover property transferred by the debtor or money paid by the debtor to a creditor before the case is filed.

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