What are the differences between the various chapters of bankruptcy?

InTitle 11of the美国法典(theFederal Bankruptcy Code), there are four bankruptcy filings:

The filing generally depends on the person's financial situation. Reportedly, the most common filing isChapter 7. Companies, married couples and individuals are allowed to file Chapter 7.

Adebtorfiling Chapter 7 is essentially scrapping everything and starting over, hoping for a clean financial slate. Basically what happens is that once the filing is underway, an administrator ortrusteeis appointed to maneuver the sale of the debtor'sassets. This does not necessarily mean that everything the person owns is sold. Both federal and state laws allow for certainexemptions, meaning that the debtor might get to keep some property, such as his or her primary residence or personal items like clothing. Once the debtor's assets areliquidated, the trustee pays certaincreditorsa portion of the money raised. Obviously, not all of the creditors receive money from the proceeds, so many of those financial obligations are "forgiven," ordischarged. Once someone has filed for bankruptcy under Chapter 7, he or she cannot file again for seven years, and debts that were not forgiven in a previous filing will not be discharged in the next filing.

It is important to note that there are certain debts for which the debtor will receive no forgiveness. Alimony, child support andtaxesare not discharged under any bankruptcy filing, andstudent loansare seldom discharged (seethis pagefor details). So, if a lot of your debt falls into these categories, you might be better off filing Chapter 13.

Chapter 12andChapter 13are basically the same filing, except that Chapter 12 is forfamily farmersand Chapter 13 is for other individuals. As long as you have a steady, reliable income, less than $269,250 inunsecured debtand less than $807,750 insecured debt, you can file Chapter 13. Once the filing is made, the debtor is assigned a trustee. The debtor and trustee develop a proposal for arepayment plan. The court decides whether to accept or alter the plan or dictate another repayment plan altogether. Once the plan is decided upon, it can last anywhere from three to five years.

You may be wondering why someone would file for Chapter 12 or 13 instead of Chapter 7. There are a couple of reasons for this:

Chapter 11bankruptcy is very similar to Chapter 13. The main difference is that there is no limit regarding the amount of money owed by the debtor. Originally only intended for large corporations, individuals can now file Chapter 11 as well.

Filing for bankruptcy is not to be taken lightly. It affects your credit rating for many years. The decision to file is best made under the counsel of a financial planner and/or a legal representative.

For more information on bankruptcy and debt, check out the links on the next page.