What Are The Types of Personal Bankruptcy?

Written by Adam Peck Category: Nursing Homes January 23rd, 2013 2 min read

Essentially, there are basically two types of bankruptcy available to individuals. Even though looked at as being two types, Chapter 7 and Chapter 13 bankruptcy do have certain similarities. Also, there exists the option of moving from one to the other provided you fill certain prerequisites.

In a typical case where Chapter 7 bankruptcy comes into play, the debtor would be a person with very few assets and a lot of debts. In such a case anything that the debtor may own is used to pay off creditors, but unlike with Chapter 13 where certain debts are dischargeable, in Chapter 7 bankruptcy they are not. (By dischargeable one means that payment of debt can be avoided if the court grants a discharge.)

A debtor would ordinarily file a Chapter 13 bankruptcy because of any sort of arrears, for example with rent or car loan or things like that. Creditors are paid based on a plan for the future earnings of the debtor. For this to come into effect, the basic requirement is that the debtor has a regular income.

Apart from these, a third type of bankruptcy is called a Chapter 12 which is limited to family farmers. On a larger level, we can also look at Chapter 11 which deals with cases where the debt in question is a huge sum. Ordinarily, Chapter 11 debtors are companies, and the processes involved in filing the same extremely complex.

Coming back to personal bankruptcy, while with Chapter 7 bankruptcy filing there is no ceiling for debt restrictions the rules change with Chapter 13. In the latter the debtor must figure out a Best-odds budget and a Best-effort budget for the creditors.

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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.