What Are The Different Types of Bankruptcy?

Written by Adam Peck Category: Business Law January 23rd, 2013 2 min read

Types of bankruptcy:

One might have heard the words Chapter 7 or Chapter 11 but, what are they? These are actually types of bankruptcy, which are named after the title chapter of the federal bankruptcy act. Below given are the three common types of bankruptcy available.

Chapter 7:

Chapter 7 is also called as liquidation bankruptcy. In the chapter 7 bankruptcy rules, all assets and the non-exempt properties if they exist are turned to a trustee for converting them into cash, so they can pay it to the creditors. In return of this the debtor will receive Chapter 7 discharge which will release all the debts from his accounts. To check whether a person is eligible for filing chapter 7 or not, he has to give Chapter 7 Bankruptcy Means Test. This test is a formula which is designed to keep away the filers of higher income from filing it.

Chapter 11

This bankruptcy is normally used for business and it’s not an option for an individual consumer. This type of bankruptcy gives business an opportunity to reorganize the business, restructure the debts and get out from it. It’s also expensive to pursue chapter 11 bankruptcy.

Chapter 13

Chapter 13 bankruptcy is also called as mini-chapter 11 because it also allows few qualified individuals and small proprietary business to file it. Chapter 13 bankruptcy enables a debtor to retain his assets which would or else be liquidated by chapter 7 trustees.

According to chapter 13 bankruptcy information, one can keep his home and car under chapter 7 or chapter 13. Though there are few cases in which it would not allow to keep the rental properties, gun collections etc. but if a person files for chapter 13 bankruptcy then he can keep his luxurious items.

– from Steven Peck, Senior Attorney at Peck Law Group

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Written by Adam Peck

Expertise: Personal Injury

Adam J. Peck, ESQ is a principal with Peck Law Group, APC. In 2008, Mr. Adam Peck received his Juris Doctorate from Whittier Law School where he graduated Cum Laude. His practice is primarily dedicated to representing Elders, Dependent Adults, along with their loved ones and family members, who have suffered horrific personal injuries.