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Bankruptcy: The word bankruptcy is formed from the ancient Latin bancus (a bench or table), and ruptus (broken). A “bank” originally referred to a bench, which the first bankershad in the public places, in markets, fairs, etc. on which they tolled their money, wrote their bills of exchange, etc. Hence, when a banker failed, he broke his bank, to advertise to the public that the person to whom the bank belonged was no longer in a condition to continue his business. As this practice was very frequent inItaly, it is said the term bankrupt is derived from the Italian banca rotta, broken bank

There are six types of bankruptcy under the Bankruptcy Code, located at Title 11 of the United States Code:

  • Chapter 7: basic liquidation for individuals and businesses; also known as straight bankruptcy; it is the simplest and quickest form of bankruptcy available
  • Chapter 9: municipal bankruptcy; a federal mechanism for the resolution of municipal debts
  • Chapter 11: rehabilitation or reorganisation, used primarily by business debtors, but sometimes by individuals with substantial debts and assets; known as corporate bankruptcy, it is a form of corporate financial reorganisation which typically allows companies to continue to function while they follow debt repayment plans
  • Chapter 12: rehabilitation for family farmers and fishermen;
  • Chapter 13: rehabilitation with a payment plan for individuals with a regular source of income; enables individuals with regular income to develop a plan to repay all or part of their debts; also known as Wage Earner Bankruptcy
  • Chapter 15: ancillary and other international cases; provides a mechanism for dealing with bankruptcy debtors and helps foreign debtors to clear debts.

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