08 Sep Bankruptcy Basics: Who Can Be A Debtor?
Any person, and almost any business may file a bankruptcy petition. Banks and insurance companies may not be eligible for bankruptcy but almost all other entities who are not individuals can file under either Chapter 7, Chapter 11, or Chapter 12. A business that is NOT a partnership, corporation, or business trust, cannot file a separate bankruptcy petition on its own, but must be filed as an individual bankruptcy under the person’s name (like a sole proprietorship).
A voluntary petition is when the person or business that owns the debt files the petition. A voluntary petition can be filed under Chapter 7, 9, 11, 12, or 13 .
The creditors (the people/businesses that are owed money by the debtor) may also have the right to file a petition against a debtor (whether it is a person or a business entity) which owes them money, and is not paying. This is called an involuntary petition. Creditors have some restrictions. The debtor can contest the involuntary case. If the debtor is successful in arguing that no involuntary petition should have been filed, the Court can impose penalties against the creditors who filed the case An involuntary petition can be filed only under Chapter 7 or Chapter 11 (a Chapter 11 is usually a business bankruptcy).
A Chapter 12 bankruptcy can only be filed by a family farmer or family fisherman. There is a maximum amount of debt allowed under a Chapter 12.
Only a person can file a Chapter 13 petition. There is a maximum amount of debt you can have under a Chapter 13.
A Chapter 9 case is a bankruptcy filed by a city/town which needs time to reorganize its debts.
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