Bankruptcy - Understand the Different Chapters


Bankruptcy is a difficult process, but it can be made easier when you realize that different situations call for different types of bankruptcy cases. If you decide to file without a lawyer you may end up in the wrong type of case, which is a reason to sit down and speak with a bankruptcy attorney before making a potentially disastrous move.

These are six different types of bankruptcy chapters:

Chapter 7 Bankruptcy: This type of case is also called "liquidation" or "straight" bankruptcy. You will receive a discharge of most types of unsecured debts (credit cards, personal loans, overdrafts, medical and dental bills) but some other bills are not going to be wiped out. In return for this discharge of debt you will be required to surrender certain types of property. Most people file for bankruptcy under Chapter 7, but will opt for other solutions if they have debts that would not be wiped out or would lose property by doing so.

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Chapter 13 Bankruptcy: This type of case is called "repayment" bankruptcy. You will be required to repay a portion of your debts in return for keeping all of your property. Chapter 13 is most commonly used by people who do not qualify for Chapter 7 or who want to use the federal laws to repay debts such as past-due mortgage and car loan payments over time in order to save their home or automobile. Chapter 13 payment plans last 3-5 years depending on your household income, property and debt levels.

Chapter 11 Bankruptcy: Formerly reserved for big business interests, Chapter 11 is now being used by consumers who would otherwise file for Chapter 13 but do not qualify due to the amount of debt that they owe. Chapter 11 is extremely complex and costly, but can help if you've got a debt load above the limits for Chapter 13.

Chapter 12 Bankruptcy: This is similar to Chapter 13, but is reserved for family farmers.

Chapter 9 Bankruptcy: This is used by municipalities and governmental entities that need to file for bankruptcy.

Chapter 15 Bankruptcy: The purpose of Chapter 15 is to provide effective mechanisms for dealing with parties and property in more than one country.

As you can tell, most individuals file for bankruptcy under Chapter 7 or Chapter 13. The mechanisms for handling these types of cases are well-defined, and most experienced bankruptcy lawyers have a solid understanding of both.

When making a decision on which type of case to file it's important to speak with an attorney who can give you enough information on how you would be affected. Don't hire a lawyer who pushes you into one type of bankruptcy or the other without fully explaining everything to you.


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