Credit and Bankruptcy Law
What are the basic types of bankruptcy?
There are six different types of bankruptcy cases, but by far the two most common are Chapter 7 bankruptcy and Chapter 13 bankruptcy. The other forms are Chapter 9, Chapter 11, Chapter 12, and Chapter 15. The types are so-named after the chapters they fall under in the Bankruptcy Code.
Chapter 7—sometimes referred to as straight bankruptcy or liquidation bankruptcy—is the most commonly filed form of bankruptcy. Most individual consumers file Chapter 7 bankruptcy. This form is ideal for consumers with modest economic means, little in the way of assets, and high debts. In Chapter 7, most of the time a consumer’s debts are discharged—meaning they are wiped away clean, giving the person a chance at a fresh start in life. More than 60 percent of all bankruptcy cases are filed under Chapter 7.
Chapter 13 is referred to as reorganization bankruptcy for individuals. In such a bankruptcy, individuals repay a portion of their debts over a three-to five-year period.