What are the different types of bankruptcy?

There are several different types of bankruptcy, each designed to address specific financial situations. The most common types of bankruptcy are:

  1. Chapter 7: Also known as “liquidation bankruptcy,” Chapter 7 bankruptcy is designed for individuals or businesses with limited income and assets. In this type of bankruptcy, the debtor’s non-exempt assets are sold, and the proceeds are used to pay off creditors. Most unsecured debts are discharged, meaning the debtor is no longer responsible for paying them.
  2. Chapter 11: Chapter 11 bankruptcy is typically used by businesses that need to restructure their debt and operations to stay in business. It allows the business to continue operating while it develops a plan to pay off its creditors. Under Chapter 11, creditors have a say in the reorganization plan and may be able to receive more money than they would under Chapter 7.
  3. Chapter 13: Chapter 13 bankruptcy is designed for individuals with a regular income who can still pay back a portion of their debts. Under this type of bankruptcy, the debtor develops a repayment plan over three to five years to pay off their debts.
  4. Chapter 12: Chapter 12 bankruptcy is similar to Chapter 13, but it is specifically designed for family farmers and fishermen.
  5. Chapter 15: Chapter 15 bankruptcy is a type of bankruptcy that deals with international insolvency cases. It allows foreign debtors to file for bankruptcy in the United States and receive assistance from U.S. courts.

It’s important to note that bankruptcy laws can vary by state and country, so it’s essential to consult with a bankruptcy attorney for guidance on the best course of action for your specific situation.