“Chapters” Of Bankruptcy

What Are The Different “Chapters” Of Bankruptcy And What Do They Do?

Under Federal bankruptcy laws, there are a variety of different types of bankruptcy, or chapters.  Those different chapters are commonly used for different people or entities with different kinds of debt.

Chapters of Bankruptcy

There are four bankruptcy “chapters”:

  • Chapter 7 is the most common type of bankruptcy for individuals.  It is known as “straight” bankruptcy or “liquidation.” It involves the liquidation of non-exempted property to pay creditors.
  • Chapter 11, is commonly used by businesses and business entities, however individuals can use this form of bankruptcy as well.  It is known as “reorganization”, is generally used for entities and individuals whose debts are particularly large.
  • Chapter 12 is reserved for family farmers.
  • Chapter 13 is the other type of bankruptcy commonly used by individuals.  It is called “debt adjustment”. It requires a debtor to file a plan to pay debts (or parts of debts) from current income.

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