ORANGE COUNTY IN BANKRUPTCY : BANKRUPTCY’S MANY CHAPTERS

U.S. bankruptcy laws, initially patterned on British provisions, provide for the orderly relationship between debtors and creditors. As federal law has evolved, states also have enacted their own statutes. But federal laws prevail in any conflict, under the supremacy clause of the Constitution. Here are the types of bankruptcy under the federal code:

CHAPTER 7: Colloquially referred to as “straight bankruptcy,” this relates to liquidation of the estate. It allows individuals to keep some personal property. Other assets must be sold to pay at least part of the debt. Those eligible to liquidate under this chapter include: individuals, partnerships or corporations with a residence or place of business in the United States. Railroads, banks, insurance companies and savings and loans are not eligible.

CHAPTER 11: Individuals are eligible for this type of bankruptcy protection, but it is designed primarily for reorganization of businesses. It is so complex that is of limited value for smaller businesses and individuals.

CHAPTER 13: This allows repayments of debt over time for individuals with regular incomes--wages, welfare payments, pensions, etc. It is limited to individuals of modest resources. Extended payments are allowed for up to five years.

Orange County Bankruptcy Filings ‘89: 8,306 ‘93: 14,030