What Are The Different Types of Bankruptcy?

There are 2 Main Types of Bankruptcy Proceedings

  • (Chapter 7) Liquidation of the debtor’s property (except for certain exempt property) and distribution of the proceeds, if any, to creditors. 
  • (Chapter 13) Debt adjustment by an individual debtor or husband and wife that allows them to repay their creditors, in whole or in part, over a period of three to five years in accordance with a detailed plan approved by the court.

In the United States there are 2 main types of Bankruptcy that you need to know about. Chapter 7 Bankruptcy which is a liquidation where you just get rid of most of all of your debt and don’t have to pay anything back to anybody. There second type is Chapter 13 Bankruptcy which is a reorganization where you’re paying something back usually not all of it and you are in a payment plan of usually 3 to 5 years.


The Bankruptcy Code provides 6 Different Types of Bankruptcy

There are 6 total types of Bankruptcy listed below which include 4 lesser known types of Bankruptcy that are not as commonly used as Chapter 7 and Chapter 13:

  1. Chapter 7 — Liquidation Bankruptcy
  2. Chapter 9 —- Municipalities 
  3. Chapter 11 — Large Reorganization.
  4. Chapter 12 — Family Farmers.
  5. Chapter 13 — Repayment Plan
  6. Chapter 15 — Used In Foreign Cases.


Listed below is a Brief Summary of each of the 6 Types of Bankruptcy

Chapter 7: Liquidating Bankruptcy

The most common type of bankruptcy filed is Chapter 7. More than 70 percent of bankruptcy cases are filed under Chapter 7 of the Bankruptcy Code.

Chapter 9: Municipalities 

Chapter 9 Bankruptcy is for municipalities – cities, towns, counties and school districts. Municipalities that file Chapter 9 earn protection from creditors while they develop a plan for adjusting their debts. 

Chapter 11: Reorganization (Mainly for Businesses)

Another type of bankruptcy case is a Chapter 11 Reorganization. 

It is generally used by businesses but can be used by individual debtors who do not qualify for Chapter 13 because their debts exceed the Chapter 13 limit. 

Chapter 12: Farmers

Chapter 12 bankruptcy is designed for “family farmers” and “family fisherman” that are under financial distress. Under chapter 12, the person in debt comes up with a plan to pay back creditors over three to five years.

Chapter 13: The “Home Saving/Car Saving” Chapter

A chapter 13 case is often used by individuals who want to catch up on past due mortgage or car loan payments and keep their assets. 

In Chapter 13, a debtor must propose in good faith to pay all or part of the debts from future income over a period of 3 to 5 years.

 If the court approves the plan, the debts may be settled in this manner, even if some creditors object to the plan. If the debtor makes the required payments, he or she will be able to keep his or her property.

Chapter 15: Foreign Cases

In 2005 Chapter 15 Bankruptcy was added to the U.S. Bankruptcy Code.

If a case involves more than one country it will be filed under Chapter 15. 

Chapter 15 helps foreign debtors, foreign courts and the U.S. Bankruptcy Courts cooperate with each other. If you are a foreign debtor with assets in multiple countries then you might file for bankruptcy under Chapter 15.

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