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2 Individuals filing Chapter 7 3 2003 Statistics 4 See also: |
When a troubled business is badly in debt and unable to service that debt or pay its creditors, it may file (or be forced by its creditors to file) for bankruptcy in a federal court under Chapter 7 (liquidation) or Chapter 11 (reorganization). A Chapter 7 filing means that the business intends to sell all its assets, distribute the proceeds to its creditors, and then cease operations.
This may or may not mean that all employees will lose their jobs; when a very large company enters Chapter 7 bankruptcy, it may be that entire divisions of the company are sold intact to other companies during the liquidation.
Secured creditors, such as bondholders, have a higher-priority claim on the proceeds than unsecured creditors, such as vendors who have not yet been paid for products they previously delivered to the company.
Individuals can file for bankruptcy in a federal court under Chapter 7 (a "straight bankruptcy") or Chapter 13 (a "reorganization"). In a Chapter 7 bankruptcy, the individual is allowed to keep certain exempt property, but all other assets are sold to repay creditors. All unsecured debt is cancelled.
The disadvantage of filing for personal bankruptcy is that a record of this stays on the individual's credit report for 10 years, and most creditors will not risk lending money to such an individual.
Bankruptcy filings by individuals:
Source: November 14 2003 News Release, Administrative Office of the U.S. Courts. (External link to PDF file: [1])Businesses filing Chapter 7
Individuals filing Chapter 7
2003 Statistics
Bankruptcy filings by businesses:
The total number of bankruptcies rose 7.4 percent over the previous twelve months. These totals were for the 12-month period ending September 30, 2003.