My Net Worth

The US DOJ kids website defines bankruptcy as "statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start. Under the protection of the bankruptcy court, debtors may discharge their debts, perhaps by paying a portion of each debt." (I chose the kids website to keep the concept simple and easy to understand.)

There are five types of bankruptcy: 7, 9, 11, 12, and 13.

Chapter 7 (Liquidation): The debtor’s non-exempt assets, if any, are liquidated to pay off the creditors. Can be filed by either a business or individual. No-asset cases are where the debtor has no non-exempt assets available for liquidation.

Chapter 9 (Adjustment of Debts for Municipalities): Similar to a Chapter 11 reorganization, but on a municipality (city, county, school districts, etc.) can file under Chapter 9.

Chapter 11 (Reorganization): The debtor proposes a reorganization plan to keep the business alive and pay creditors over time. Usually filed by businesses, but individuals can as well.

Chapter 12 (Adjustment of Debts for Farmers): See Chapter 13. Filed by ‘family farmers’ as defined in the Bankruptcy Code.

Chapter 13 (Adjustment of Debts): A debtor can adjust their debts, keep their property, and repay their debts over a period of 3 to 5 years. Filed by an individual.

Here is the link for the above information.

The Bankruptcy Code is a federal law and all bankruptcy filings are made through the federal court system, specifically through the US Bankruptcy Court. The court tracks various statistics, by period as well as by district. The link for the statistics is can be found here.

An important component of the bankruptcy process, aside from the court, is the trustee. As described in the US Trustee Program’s website, their mission is to

The United States Trustee Program acts in the public interest to promote the efficiency and to protect and preserve the integrity of the bankruptcy system.

It works to secure the just, speedy, and economical resolution of bankruptcy cases; monitors the conduct of parties and takes action to ensure compliance with applicable laws and procedures; identifies and investigates bankruptcy fraud and abuse; and oversees administrative functions in bankruptcy cases.

This mission also allows the trustees to compile statistics on bankruptcies as well. The link to general information and statistics can be found here.

While there are many more elements to bankruptcy procedures and nuances, the intent of this post is to lay the groundwork for further exploration of the statistics gathered by the US Bankruptcy Court and the US Trustee Program as it relates to individuals.