What are the different kinds of bankruptcy?

There are four types of bankruptcy available to individuals:

  • Chapter 7 (a two to three month process in which your property is sold to pay your debts);
  • Chapter 13 (a three to five year process in which you pay a portion of your debts under a court-supervised repayment plan);
  • Chapter 12 (like Chapter 13, but only available to family farmers and fishermen); and
  • Chapter 11 (a more complex process used primarily by business debtors, but sometimes by individuals with substantial debts and assets).

The two most important types of cases for consumers are chapter 7 and chapter 13. Both provide for some possible payments to creditors, a discharge for you and supervision by a Trustee appointed by the court. In both types of bankruptcy, most creditors must stop efforts to collect debts after you file your case. This protection is called the "Automatic stay".

Chapter 7 involves surrendering some of your property in return for a discharge of many of your debts. The ????? sells this property and pays your creditors. In chapter 13, you keep your property but must commit to a three- to five-year repayment plan. You then obtain a Discharge of most of the debts not paid in the plan.