CMS Pub. 100-06, ch. 3, § 140.2.2

Title 11 of the United States Code (the Bankruptcy Code) identifies four types of bankruptcies that may

involve Medicare providers: Chapter 7, 9, 11 and 13. We briefly describe each type here to familiarize

the Contractor with these types of bankruptcy. However, these general descriptions do not replace your

attorney's specific advice in a particular bankruptcy case.

1. Chapter 7 - Debtors file Chapter 7 bankruptcies to obtain discharge of their debts. Companies that

file under Chapter 7 generally close. A court-appointed trustee accumulates the assets of the debtor, sells

them, and distributes the money among those whom the debtor owes (the creditors).

2. Chapter 9 - Chapter 9 bankruptcies involve municipalities, including entities such as hospital

districts. In a Chapter 9 case, the municipal entity itself – rather than the individual hospitals it operates

– is eligible for bankruptcy relief. Chapter 9 provides for reorganization, much like Chapter 11.

3. Chapter 11 - Debtors file Chapter 11 to reorganize a business or, in some cases, an individual’s

financial affairs. To emerge from Chapter 11, the debtor in possession submits a Plan of Reorganization

("Plan"), which specifies the amount and schedule of payments to creditors. Creditors whose claims are

impaired under the Plan are entitled to vote on it, while creditors whose claims are unimpaired are

deemed to accept the Plan. The Bankruptcy Court must confirm the Plan before it becomes effective.

Recovery amounts vary, and once the Plan is confirmed, the Bankruptcy Code provides for discharge of

the remaining debt, subject to certain exceptions.

4. Chapter 13 - Chapter 13 bankruptcies allow individuals (including sole proprietorships) with regular

income to adjust their debts. Generally, debtors must file a repayment plan within 15 days after filing

the petition. The Chapter 13 plan typically extends over a period of three to five years, during which the

debtor makes regular payments to a trustee for distribution to creditors.