There are four types of bankruptcy cases provided under the law:
- Chapter 7 is known as ‘straight’ bankruptcy or ‘liquidations.’ It requires a debtor to give up property which exceeds certain limits called ‘exemptions’, so the property can be sold to pay creditors.
- Chapter 11, known as ‘reorganization’, is used by business and a few individual debtors whose debts are very large.
- Chapter 12 is reserved for family farmers.
- Chapter 13 is called ‘debt adjustment’. It requires a debtor to file a plan to pay debts (or parts of debts) from current income.
Most people filing bankruptcy will want to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly.