Chapter 7 (Liquidation)

Chapter 7 is designed to repay debts owed to creditors by selling most of the debtor's property. When a Chapter 7 case is filed, a trustee is appointed to take over the debtor's property for the benefit of the debtor's creditors. The debtor, however, is allowed to keep a limited amount of "exempt" property specified by law. The trustee then sells all non-exempt property of the debtor and distributes it to creditors in accordance with procedures set forth in the bankruptcy laws.

Chapter 13 (Debt Adjustment of An Individual)

In a Chapter 13 bankruptcy, the debtor may keep his or her property, but must repay creditors in installments taken from the debtor's future earnings. A debtor is required to submit a plan for approval by the court specifying how and when the debts will be repaid to creditors. A trustee is appointed in a Chapter 13 case, and a portion of the debtor's future income in most cases is paid to the trustee, who then pays creditors.

Chapter 11 (Reorganization)

Chapter 11 is designed mainly to give an ongoing business an opportunity to resolve financial problems through reorganization. A trustee is not normally appointed. The debtor is allowed to continue to operate the business under court supervision.

Chapter 12 (Debt Adjustment of a Family Farmer)

Chapter 12 is similar in many respects to Chapter 13, except that it is available only to family farmers.

Chapter 9 (Debt Adjustment of a Municipality)

Chapter 9 is available only to a political subdivision (i.e., a city, town, or county), public agency, or other instrumentality of a state.

Questions about Bankruptcy