Bankruptcy By the Numbers: 109 - Who Are You, And Can You Be A Debtor?

Lots of focus goes into the “active” chapters of filing bankruptcy - Chapter 7, 11, 13, and there is plenty of action in Chapter 3 and Chapter 5 as well. But Chapter 1 (the 100s) gives us many of the foundations needed to build a bankruptcy system. These statutes define terms, set the powers of the judges, and in Section 109, defines who may qualify as a debtor in a bankruptcy.

The first limitation is that a debtor must be a person that resides or has domicile, place of business or property in the United States, or a municipality. You will note that this seems to not include business organizations. However, “person” is defined elsewhere to include individuals, partnerships and corporations. For a Chapter 7 case, the debtor can be any person (with a few exceptions, mostly railroads and banks). Chapter 11 cases are available to persons, railroads, certain banks (but not stockbrokers or commodity brokers).

Chapter 9 bankruptcies are only available to municipalities (Detroit being the most famous to have filed recently), and Chapter 12 bankruptcies are only open to family farmers or family fishermen. Neither of these are filed very often, so don’t get much public coverage.

Chapter 13 bankruptcy is the most limited. It is only available to individuals (not businesses), and places limits on the amount of debt that can be held by the filer. In function, a Chapter 13 bankruptcy allows for reorganization of debts in a similar manner to a Chapter 11 bankruptcy, but with greater simplicity and much lower costs to file.

So, if you are a human person (or married couple), you can file any chapter. except Chapter 9, that best suits your needs and situation. If you are a business organization, you can choose between Chapters 7 and 11. And if you are a city, why are you reading this blog?

Section 109 does place some other limits on who can file, including the dreaded requirement for “credit counseling,” and the potential for a court to ban refiling for 180 days in the event of willful bad behavior, and asking for your case to be dismissed after a filing for relief from automatic stay. This is to prevent a cycle of refiling just to avoid a foreclosure.

An experience bankruptcy attorney will be able to help guide you to the chapter of bankruptcy that best fits your situation.