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Figure 22.6Types of Bankruptcy ProceduresChapter Who Can File? When Used? Special FeaturesChapter 7:OrdinaryBankruptcyEveryone is eligible, exceptbanks, railroads, and insurancecompanies; filing can bevoluntary or involuntaryUsed when debtor wants todischarge most debts andbegin with a clean slateDebtor’s property is liquidated;some property is exempt; somedebts cannot be dischargedChapter 11:ReorganizationIndividuals, partnerships, andcorporations can file; railroadscan file; only commoditybrokers and stockbrokerscannot file; filing can bevoluntary or involuntaryUsed when debtor, usually abusiness, wants to continueoperating, but needs toreorganize and liquidatedebtsDebtor-in-possession feature;debtor files plan within120 days; plan must be fair,equitable, and feasible;creditors can also file plans;confirmation neededChapter 12:Family FarmerDebtAdjustmentFamily farmers can file,including partnerships andcorporations; debt ceiling of$1.5 millionUsed when a debtor is afamily farmer who needs adebt adjustment plan tokeep the farm runningDebtor-in-possession feature;debtor files plan within 90 days;plan lasts three years (withtwo-year extension possible);plan must be confirmedChapter 13:Individual DebtAdjustmentIndividuals only; no corporationsor partnerships; noinvoluntary filings allowed;debt ceiling of $450,000.Used when an individualdebtor with a steady incomevoluntarily decides to adopta debt adjustment planOnly the debtor can file a plan;payments must start 30 daysafter plan submitted, a fewdebts cannot be discharged;plan lasts three years (withtwo-year extension possible)Chapter 7 bankruptcy may be brought either voluntarily by thedebtor or involuntarily by creditors. Three creditors must file the petitionfor bankruptcy if the debtor has 12 or more creditors. The combineddebt owed to the three must exceed $11,625. A single creditor who isowed a debt of more than $11,625 can also file if the debtor has fewerthan 12 creditors.Chapter 11 bankruptcy offers a method for businesses to reorganizetheir financial affairs and still remain in business. When a petitionfor reorganization under Chapter 11 is filed, a reorganization plan forthe business is developed. Once the plan is approved by a certain numberof creditors and the court, it will go into operation. If the plan is successful,the business will continue. If not, it will be forced to close.Chapter 12 bankruptcy helps family farmers create a plan for debtrepayment that allows them to keep their farms running. A familyfarmer is defined as one who receives more than one-half of his or hertotal income from the farm. To file Chapter 12 bankruptcy, 80 percentof the debt must result from farm expenses.BANKRUPTCY LAWSBankruptcy rules applydifferently to individualsand businesses. Afterexamining Figure 22.6,compare personal withbusiness bankruptcy law.What options are availableto individuals? How arethey different than theoptions for businesses?Chapter 22: Borrowing Money and Buying on Credit 497