Types of Bankruptcy

The bankruptcy laws are contained in Title 11 of the U.S. Code.  There are several options for filing bankruptcy.  Out of the types of bankruptcy, the most common are Chapters 7 and 13. The other Chapters are for specific entities.

• Chapter 7 bankruptcy is for individuals, but businesses may also file under Chapter 7. Chapter 7 wipes out most debt. Generally, all of the assets are sold and the money is used to pay off the creditors.
• Chapter 13 bankruptcy is generally for individuals. Chapter 13 allows the debtor to keep certain parts of his or her estate (such as one house and one vehicle) and is a re-organization of debt. The trustee assigned to the case reviews the debtor's financial affidavit and sets up a payment plan. The debtor pays the payments to the bankruptcy court. The court then pays the creditors a portion of what they are owed.
• Chapter 11 bankruptcy is generally used for businesses that want to reorganize. Chapter 11 allows a company to keep its doors open so it can continue to do business.
• Chapter 9 bankruptcy is used for the adjustment of debts of a municipality. Individual debtors do not file under Chapter 9.
• Chapter 12 bankruptcy is used for the adjustment of debts of a family farmer or fisherman with a regular annual income.
• Chapter 15 bankruptcy is used for ancillary and cross-border bankruptcies.

The free Bankruptcy Worksheet is a good place to start for anyone considering the legal issues surrounding personal or business bankruptcy. You can also find a bankruptcy lawyer today to help you with credit and bankruptcy legal information, including the types of bankruptcy that will be the best fit for your situation.

Laws on this topic may vary from state to state. This content is not meant to provide you with complete information and it is not intended to be legal or tax advice. It is recommended that you consult with your own attorney, accountant or other advisor regarding your specific situation.