Accumulating debts can cause substantial stress for individuals and businesses. If the pressure grows too great, bankruptcy may be the only viable solution. Individuals usually file for bankruptcy under Chapter 7 or Chapter 13, while businesses often file under Chapter 11. A recent addition to the Bankruptcy Code, Subchapter V of Chapter 11, provides a form of relief that may be especially useful to small businesses.
The bankruptcy process is administered by federal courts. To start the process, a debtor will need to file certain forms with the federal bankruptcy court in the district where they live, or the district that has jurisdiction over a business debtor. The US Courts website provides a full list of bankruptcy forms that can be used throughout a proceeding. Certain forms must be filed by most debtors, while other forms are specific to Chapter 7, Chapter 13, or Chapter 11.
General Bankruptcy Forms
To start a bankruptcy proceeding, a debtor generally must file a petition (Form 101 for individuals and Form 201 for non-individuals) and certain other documents. These include a summary of assets and liabilities (Form 106 for individuals and Form 206 for non-individuals), a statement of financial affairs (Form 107 for individuals and Form 207 for non-individuals), and a schedule of executory contracts and unexpired leases (Form 106G for individuals and Form 206G for non-individuals). Other forms provide a list of all the debtor’s property (Form 106A/B for individuals and Form 206A/B for non-individuals), a list of creditors with secured claims (Form 106D for individuals and Form 206D for non-individuals), a list of creditors with unsecured claims (Form 106E/F for individuals and Form 206E/F for non-individuals), and a list of co-debtors who may share responsibility for the debts (Form 106H for individuals and Form 206H for non-individuals).
An individual debtor will need to complete Form 106C to claim certain property as exempt so that it will be protected during the bankruptcy. They also must complete schedules of income and expenditures (Form 106I and Form 106J) and provide a declaration affirming the accuracy of their filing documents. (Form 202 serves as the declaration for non-individual debtors.)
In some cases, a creditor can force a debtor into an involuntary bankruptcy. This requires filing an involuntary petition by using Form 105 against an individual debtor or Form 205 against a non-individual debtor.
A key step in the bankruptcy process is the meeting of creditors. This allows the bankruptcy trustee and creditors to check the information provided by the debtor with the bankruptcy petition. Creditors will receive notice of a Chapter 7 bankruptcy through Form 309A or Form 309B for individuals (Form 309C or Form 309D for corporations or partnerships), depending on whether a proof of claim deadline has been set in the case. Form 309I is used to notify creditors of a Chapter 13 bankruptcy. Creditors in a Chapter 11 bankruptcy will be notified through Form 309E1 (for individuals) or Form 309F1 (for corporations or partnerships). A proceeding under the new Subchapter V requires notifying creditors through Form 309E2 (for individuals) or Form 309F2 (for corporations or partnerships).
Chapter 7 Forms
Known as a liquidation bankruptcy, Chapter 7 involves turning over the non-exempt assets of a debtor to a bankruptcy trustee, who will sell the assets and use the proceeds to pay creditors. Chapter 7 usually results in a more efficient discharge of debt than other chapters, but a debtor will not be able to keep as much property. In addition to individuals, partnerships and corporations can file under Chapter 7, but only if they are not seeking to stay in business. To qualify for Chapter 7, a debtor must show that they pass a means test, which requires completing Form 122A-1 and Form 122A-2. They also must complete Form 108 to provide their plan for handling secured debts and unexpired leases.
Debtors filing under Chapter 7 often are facing extreme financial hardship. They can submit Form 103A to ask to pay the filing fee in installments, or Form 103B to ask to have the filing fee waived. Once a debtor has successfully completed the bankruptcy, the judge will issue Form 318 to grant their discharge.
Chapter 13 Forms
Known as a reorganization bankruptcy, Chapter 13 allows a debtor to avoid liquidating all of their non-exempt assets. Instead, they devise a payment plan that will allow them to pay off their debts within a period of three to five years, which is known as the commitment period. A debtor can use Form 113 to present their repayment plan to the bankruptcy court. They do not need to pass a means test, but they will need to submit Form 122C-1 to provide their current monthly income and determine whether their commitment period will last for three or five years. A debtor also must provide a detailed calculation of their disposable income by filing Form 122C-2.
If a court approves the repayment plan, it will issue Form 2300B to confirm it. Sometimes a debtor will ask for a modification to a repayment plan. When this happens, the court will issue Form 2310B to notify creditors of the proposed modification and give them time to object. Once a repayment plan has been successfully completed, a court will issue Form 3180W to grant the discharge. In rare cases, a court may issue Form 3180WH to grant a hardship discharge to a Chapter 13 debtor. This provides a discharge for most but not all of the debts for which they are personally liable, even though they did not complete all the required payments under the repayment plan.
Chapter 11 Forms
A bankruptcy proceeding under Chapter 11 is somewhat similar to Chapter 13. A debtor that files under Chapter 11 does not need to meet a means test, and their assets will not be liquidated. Instead, they will set up a reorganization plan. A debtor must disclose the creditors (except for insiders such as family members and business organizations with which they are involved) who have the 20 largest unsecured claims against them. This involves filing Form 104 (for individuals) or Form 204 (for corporations or partnerships). An individual filing under Chapter 11 will need to file Form 122B to state their monthly income, while certain business debtors will need to file Form 201A to provide information about their securities. If an individual successfully completes a Chapter 11 bankruptcy, the court usually will issue Form 3180RI to grant their discharge. Individual debtors who filed under Subchapter V of Chapter 11 may receive a discharge through Form 3180RV1 (if creditors consented to the plan) or Form 3180RV2 (if unsecured creditors did not consent to the plan). A court will use Form 3180RV3 to grant a discharge to a corporation or partnership whose Subchapter V plan was approved without the consent of unsecured creditors.
A small business can file its plan of reorganization through Form 425A and its disclosure statement through Form 425B. A small business also must file an original monthly operating report (Form 425C) and continue to file these reports until the bankruptcy court confirms the reorganization plan.