Future Business Leaders of America (FBLA) Business Law Practice Exam

What type of bankruptcy allows family farmers and fishing businesses to create a plan for debt repayment?

1. Chapter 11 bankruptcy

2. Chapter 13 bankruptcy

3. Chapter 7 bankruptcy

4. Reorganization bankruptcy

The correct answer is: Chapter 13 bankruptcy

Chapter 13 bankruptcy is specifically designed to assist individuals, including family farmers and fishing businesses, in reorganizing their debts and creating a plan for repayment over time. This type of bankruptcy allows these entities to retain their assets while establishing a feasible payment plan that can span from three to five years. Under Chapter 13, the debtor proposes a repayment plan that must be approved by the bankruptcy court. This is crucial for family farmers and fishing businesses as it provides them with the opportunity to continue their operations while managing their financial obligations. The ability to reorganize debts without liquidating assets differentiates Chapter 13 from other forms of bankruptcy. Other bankruptcy types, such as Chapter 7, involve liquidation of assets to pay off creditors, which may not be suitable for individuals or businesses that intend to retain their operations. Chapter 11 is primarily geared towards business restructurings but is often more complex and may not be specifically tailored to the needs of family farmers and fishing businesses. Reorganization bankruptcy is a broader term that can encompass multiple chapters, but Chapter 13 is the specific designation that directly caters to the needs of family farmers and fishing businesses in need of a repayment plan.