Borders Group Inc. is in the last stages of preparing a bankruptcy filing and could file Chapter 11 protection as early as Monday. Border’s shares (BGP) tumbled 33% to 25 cents on Friday. This is sad news for anyone who loves books.
People and companies file bankruptcy for many reasons. In case you were wondering, there are actually five different types.
1) Chapter 7: Calls for liquidation under the bankruptcy code. The bankruptcy court appoints a trustee who administers the bankruptcy. The person filing for bankruptcy usually retains all the typical types of household goods and clothing. If the bankruptcy trustee allows an individual in bankruptcy to keep a car secured by a car lien or a house encumbered by a mortgage, the individual filing for bankruptcy must pay all car and mortgage payments as they fall due and pay the insurance on those items. A chapter 7 bankruptcy usually lasts about four to six months. At the end of the bankruptcy, most debts are extinguished through a discharge of debts.
2) Chapter 13: This relates to individual debt and lasts for the duration of a debt repayment plan, from three to five years. General, unsecured creditors are usually only repaid a small percentage of what is owed, but past due taxes must be paid in full, as well as arrearages on secured debt, such as a mortgage or car loan. This bankruptcy may allow individuals to keep a home or car even if they have become seriously delinquent on the loans. At the end of a successful bankruptcy, most debts are extinguished through a discharge of debts.
3) Chapter 12: This is a type of bankruptcy available for family farmers and fisherman. It functions much like chapter 13.
4) Chapter 9: This is a type of bankruptcy for municipalities.
5) Chapter 11: This I reorganization under the bankruptcy code. It is primarily used by large corporations, which are insolvent and wish to pay off their debts through a repayment plan.