Help Understanding the Bankruptcy Court Process in Minnesota

Bankruptcy laws help people who can no longer pay their creditors get a fresh start – by liquidating assets to pay their debts or by creating a repayment plan. Bankruptcy laws also protect troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation.

Common and Uncommon Avenues for Bankruptcy Relief

Most cases are filed under the three main chapters of the Bankruptcy Code – Chapter 7, Chapter 11, and Chapter 13. Federal courts have exclusive jurisdiction over bankruptcy cases. This means that a bankruptcy case cannot be filed in a state (Minnesota) court.

Each of the 94 federal judicial districts handles bankruptcy matters, and in almost all districts, bankruptcy cases are filed in the bankruptcy court. Bankruptcy cases cannot be filed in state court. Bankruptcy laws help people who can no longer pay their creditors get a fresh start by liquidating their assets to pay their debts, or by creating a repayment plan.

Bankruptcy laws also protect troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation. These procedures are covered under Title 11 of the United States Code (the Bankruptcy Code). The vast majority of cases are filed under the three main chapters of the Bankruptcy Code, which are Chapter 7, Chapter 11, and Chapter 13.

There are other chapters as well, but filings under other Chapters are not as common.

Different Types of Bankruptcy

The following is a brief overview of several different Chapters in the Bankruptcy Code:

  • Chapter 7: Allows for liquidation of nonexempt assets in order to repay creditors. Not everyone will have nonexempt assets. Either way, the remainder of the dischargeable debts, such as credit card debts, are extinguished.
  • Chapter 9: Allows for the reorganization of municipalities, including cities, towns, villages, and counties, to name a few. Municipalities are given protection under Chapter 9 from creditors in order to allow the municipality to create and negotiate a plan to repay debts.
  • Chapter 11: Allows for reorganization of corporations and partnerships in order to prevent the businesses from going under. The debts are permitted to be repaid over a period of time according to a realistically achievable plan.
  • Chapter 12: Allows family farmers and family fishermen with stable income to establish a repayment plan in order to pay all or part of existing debts according to a reasonable plan. Generally payments are made in installments over three to five years.
  • Chapter 13: Allows individuals with regular or stable income to keep assets and pay creditors over time. Usually individuals are given three to five years to pay debts under Chapter 13.
  • Chapter 15: Allows a method of dealing with insolvency cases involving debtors, assets, claimants, and other parties of interest involving more than one country. Generally when there is a Chapter 15 proceeding there is another proceeding in another country, the debtor’s home country usually, as well.