Chapter 7, Chapter 11, etc. I always hear Company X filed for Chapter Y bankruptcy…what’s the difference, and where did these come from?
This thread went into different types of personal bankruptcy.
I’m not sure where the names come from-I assume that they are named after the section of the bankruptcy code that covers the types.
The names do come from the sections of the Bankruptcy Law. There are different types of bankruptcy. The one you hear most about are reorganization bankruptcy, wherein a firm will be allowed to remain in existence. The creditors will be allowed only a percentage of the moneys owed them. The creditors have to agree to this, and since something is better than nothing, they usually do.
The personal bankruptcy is when all of your non-exempt assets are sold to discharge your debts. The creditors, again, will get only a percentage if you don’t have enough assets. Secured creditors will have priority. Corporations can come under this Section too. This usually arises when the creditors do not agree to a reorganization. A trustee is appointed to liquidate the corporation.
I’m not a bankruptcy expert. Some one who is will give you more details, I’m sure.
Specifically, the chapters come from Title 11 of the US Code, which covers bankruptcy.