Merle, Jhon Vincent H.

BSBA – III – FM

In your own word differentiate the following types of bankruptcy and give a scenario or signs that the
company could be possible in filing each type.

A. Chapter 7

B. Chapter 9

C. Chapter 11

D. Chapter 13

E. Chapter 15

Chapter 7

If the individual or company has no time to handle three to five years process with chapter 13 of
filling bankruptcy, chapter 7 is the the default option, which as usual it provides a conclusion of a fresh
start because it has a much more quicker bankruptcy proceedings and mostly the common choice.
Chapter 7 is also considered as a "straight bankruptcy" which has factors that includes Freedom from
Debts, Payment for creditors, and Sale of a debtor's assets. In this type of bankruptcy, the debtor's
assets are collected and distributed to his or her creditors, that can include cash, bank accounts, stocks,
bonds and other forms of investments that has a value, but also to remember that some property of the
debtor are exempted from collection and distribution which varies by state.

The disadvantage that it would leave behind is that Chapter 7 leaves the debtor a low credit score as
well as the transparency of the bankruptcy file for years of years, as well as it gives reduction on access
for credit when debtors need to acquire some credit through other creditors due to the history of
bankruptcy. On the other hand, the advantages of this are it instantly wipes out the debt of the filler
upon the limits of Section 523 which tells there are list of debts that are not dischargeable. As for the
steps that are related through filling chapter 7 bankruptcy, there are several steps such as: 1. Credit
Counseling and 2. Means Test that overall needs the debtor to list all the assets, debts, and property
that it has even when it comes to personal, intellectual, and business property. To wrap up the
proceedings, there are a trustee that the court brings in order to collect and sell the non-exempt
property as well as check all the papers or review the paper works for clarifications and final reports in
order to wrap up the report in the court.

Example: Jane and her husband, John, retired recently and had planned to live a frugal lifestyle with the
savings they managed to accumulate during their working years. However, John had an unexpected
medical crisis, and he required regular treatment for about one year. While Jane and John have had
health insurance throughout John’s medical crisis, they paid a significant amount of out-of-pocket
expenses due to deductibles and managed to incur more than $100,000 in medical debt. Since their
retirement income largely is exempt, they decided to file for Chapter 7 bankruptcy to discharge John’s
medical debt. ( https://telpnerlaw.com/real-life-example-chapter-7-bankruptcy/ )
Chapter 9

Chapter 9 bankruptcy is reserved exclusively for municipalities as a re-organizational

bankruptcy, during which the municipality or the debtor can restructure its debts to its creditors.
Chapter 9 bankruptcy is reserved exclusively for municipalities as a re-organizational bankruptcy, during
which the municipality or the debtor can restructure its debts to its creditors. Speaking about its
purpose, the purpose of Chapter 9 bankruptcy is to negotiate a repayment plan between a municipality
and its creditors which only municipalities may file for Chapter 9 bankruptcy. Chapter 9 is a bankruptcy
proceeding that provides financially distressed municipalities with protection from creditors by creating
a plan between the municipality and its creditors to resolve the outstanding debt. Municipalities, as
defined for Chapter 9 bankruptcy proceedings, include a wide variety of governmental entities such as
cities, counties, townships, municipal utilities, taxing districts, and school districts.

Four other eligibility requirements for Chapter 9 as set forth in Section 109(c) of the Bankruptcy Codes
are: The municipality must be specifically authorized to file for Chapter 9 under state law, must be
insolvent, must desire to effect a plan to adjust its debts, and lastly the municipality must obtain
agreement of the majority of certain types of creditors or, if no agreement, it must have evidence of one
of three things: that an attempt to negotiate in good faith was made, that it would be impractical to
negotiate, or that there is reason to believe that a creditor might attempt to obtain a preference

Example: In 1994 Orange County, Calif., filed for Chapter 9 bankruptcy as a result of heavy borrowing
and risky investments intended to raise funds to pay for government services. The county faced a $1.5
billion shortfall. In 2013 Detroit became the largest city in U.S. history to file for Chapter 9 bankruptcy.
The city carried the largest municipal debt ever to be considered by the courts, estimated at between
$18 and $20 billion.

Chapter 11

Large businesses often use Chapter 11 bankruptcy reorganization case, where as the debtor can
present a plan which is for debt repayment under Chapter 11 so as accompanying business and financial
restructuring that's needed to accomplish that repayment whereas the plan must be approved by the
courts. Any business or individual can file for Chapter 11 bankruptcy protection. Businesses include
everything from sole proprietorships to corporations. It's commonly known by the public as a tool for
large companies, so people are often surprised that individuals can file for Chapter 11, too. A debtor
seeking Chapter 11 relief must not have had a recent bankruptcy case dismissed for failing to appear in
or to comply with a court order in the last 180 days. They must also have received credit counseling
from an approved agency within that time frame. I have also learned that Chapter 11 is less commonly
filed than Chapter 7 and Chapter 13, but it still far outnumbers the other less-common bankruptcy
chapters, such as Chapter 9, which is used by municipalities to reorganize their debts.

So in conclusion, Chapter 11 bankruptcy allows an individual or business to reorganize financially to pay

back its debts without forfeiting its assets as well as being involved with large corporations due to the
proceeding's complexity and high costs. Lastly that is worth to mention, A Chapter 11 debtor doesn't
usually have a trustee unless creditors intervene to request one because they feel the debtor is
mismanaging its assets. Court.

Chapter 13

People or companies tend to file Chapter 13 just because they don't want to looses a house or
car, makes too much to pass the Chapter 7 means test, and want to avoid wage garnishments and other
collections tactics and repay supports or recent tax debts over five years. Chapter 13 allows debtors to
repay all, or a significant portion, of their debts in 3-5 years under a court-ordered plan. The most
common debts discharged in a Chapter 13 proceeding are medical bills, credit card debt and personal
loans. Chapter 13 bankruptcy is often called the “wage earners” bankruptcy. A petitioner must have
regular income to enter a Chapter 13 debt repayment plan. This form of bankruptcy is mostly beneficial
to consumers with valuable assets and a high source of income.

The only advantages that i see through chapter 13 is essentially a consolidation loan in which you make
a monthly payment to a court-appointed trustee, who then distributes the money to creditors, creditors
are not allowed to have any direct contact with you and must go through the trustee instead, has a
special provision that protects co-signers to consumer debt. The creditor may not seek to collect from
the co-signer on a consumer debt, which is defined as something purchased primarily for a personal,
family or household purpose. And talking about the disadvantages, It can take up to five years to
complete the process. Chapter 7 bankruptcy usually takes 4-6 months, will ruin your credit, and Chapter
13 stays on your credit report for seven years. It does slightly less damage than a Chapter 7 judgment,
which remains for 10 years, and declaring for Chapter 13 makes it more difficult to file for Chapter 7 in
the future. You cannot declare for Chapter 7 if you have gone through Chapter 13 bankruptcy in the last
six years.

Chapter 15

Chapter 15 of the Bankruptcy Code provides a mechanism pursuant to which a foreign

insolvency, liquidation, or debt restructuring (known as a “foreign proceeding”) may be granted
recognition in the United States. It is used for insolvency cases that involve people or businesses with
assets in more than one country, that has a primary objectives are to increase international cooperation
and legal certainty for businesses and individuals that hold assets in multiple countries. A Chapter 15
proceeding is generally the secondary bankruptcy proceeding for the foreign individual or entity, with
the main one taking place in a foreign country. In simple words, Chapter 15 bankruptcy allows foreign
nationals to file for bankruptcy in the U.S. bankruptcy courts if they have assets, property, or business in
multiple countries, including the United States. It was added to the Bankruptcy Code in 2005 by the
Bankruptcy Abuse Prevention and Consumer Protection Act.