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However, there are actually six types in practice today. These less-common options can be lifelines for foreign businesses operating in the US, local governments, and farms and fisheries.
From personal hardships to major corporate collapses like Enron and Bed Bath & Beyond, filing for bankruptcy isn't a quick fix or a “get-out-of-jail-free” card—it’s a complex, structured process offering debt relief or repayment options.
Chapter 7 is for liquidating personal assets to clear debts, Chapter 13 allows a repayment plan for individuals, and Chapter 11 lets businesses reorganize to stay afloat.
However, there are actually six types in practice today. These less-common options can be lifelines for foreign businesses operating in the US, local governments, and farms and fisheries.
In order to resolve a dispute over how a label was treating him as an artist, he self-produced an album and racked up $500K in debt. The resulting bankruptcy filing allowed him to start a new contract with the label on more favorable terms.
It has done just that since 1800. This legislation, which outlines the various types of bankruptcy filings, has evolved over time. The most recent iteration is the Bankruptcy Reform Act of 1978, which introduced Chapter 11 filings in an effort to make the process easier for businesses and individuals.
In 1787, this founding document gave Congress the right to establish nationwide bankruptcy laws. Legislators took advantage of that power in 1800 when they passed the Bankruptcy Act of 1800, the first comprehensive bankruptcy law at the federal level.
Chapter 7 is the most popular type of filing for individuals needing relief. However, to be eligible, debtors must pass an income means test. At the most basic level, they must prove that their average monthly income over six months is below their state’s median. But there are exceptions.
Sean Jacobsohn, a tech investor and founder of the Failure Museum, uses items from failed businesses to explain the six primary forces behind their flops, from a Theranos mug to a Blockbuster membership card.
Debtors must know whether their liabilities are secured or unsecured and what type of assets they have. They also need to know what a filing can and can’t help them with.
Nearly all of its 26,000 employees immediately lost their jobs. But in London, a few hundred remained tucked away, working for another decade to wind down the bank’s European business.
The United States is home to more than 33 million businesses, the vast majority of which are small businesses, with millions being created (and others closing shop) every year. These businesses often rely on loans, provide the goods and services that keep the economy flowing, and sometimes even grow large enough to enter public markets or provide private investment opportunities. Explore key topics central to business and finance, from the role of the Federal Reserve to how initial public offerings work, how millions of American students finance higher education, and more.