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Types of Bankruptcy


Chapter 7 Bankruptcy

Chapter 7 is the most popular form of bankruptcy. It is a liquidation proceeding in which the bankruptcy court is asked to eliminate the debts owed. This gives the debtor (the individual or individuals filing for bankruptcy) a “fresh start”. However, certain debts, such as student loans, court-ordered tickets, fines and restitution, alimony and child support, cannot be eliminated or discharged.

In a Chapter 7 bankruptcy case, all of the debtor’s nonexempt assets are liquidated and distributed to creditors. The debtor then receives a bankruptcy discharge in about ninety days after filing bankruptcy.

Chapter 13 Bankruptcy

Instead of paying creditors out of the debtor’s assets, a Chapter 13 bankruptcy provides a repayment plan for the debtors to pay back creditors. It is available to individuals with regular income. In a Chapter 13 bankruptcy, debtors keep their assets and pay back creditors out of future earnings over the life of the payment plan (3-5 years). However, the Chapter 13 debtor can also choose to make some payment out of their current assets. At the completion of the payment plan, the debtor receives a discharge. With certain exceptions, the discharge that the Chapter 13 debtor receives is similar to the discharge that the Chapter 7 debtor receives.

Chapter 11 Bankruptcy

By and large, chapter 11 is a type of bankruptcy reserved for large corporate reorganizations. Chapter 11 shares many of the qualities of a chapter 13, but tends to involve much more complexity on a much larger scale.

However, chapter 11 does not usually pertain to individuals whose debts are primarily consumer debts.

Chapter 12 Bankruptcy

Chapter 12 of the Bankruptcy Code was enacted by Congress in 1986, specifically to meet the needs of financially distressed family farmers. The primary purpose of this legislation was to give family farmers facing bankruptcy a change to reorganize their debts and keep their farms.

However, as with chapter 11, since chapter 12 does not usually pertain to individuals whose debts are primarily consumer debts

Further information about chapter 11 and chapter 12 bankruptcy will be provided by reference to the following resource: The Bankruptcy Basics brochure prepared by the Administrative Office of the United States Courts, dated June 2000l, and which can be accessed over the internet by visiting the following website: www.uscourts.gov/bankruptcycourts.html.

Note: We are a law firm and under the bankruptcy code are considered a debt relief agent who helps people file for relief under the bankruptcy code.