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Legal Helpers Tip: Many bankruptcy FAQs revolve around which bankruptcy types are which and how the types differ from each other. Technically there are six types of bankruptcy as defined in the U.S. Bankruptcy Code.
Chapter 9 (reorganization of municipalities), 12 (debts of a "family farmer," or a "family fisherman"), and 15 (cross-border insolvency) are not common.
The most popular are:
Chapter 7: Available to individuals or companies, Chapter 7 provides that the
petitioner deliver all non-exempt assets to the court for liquidation.
The proceeds are distributed fairly to all named creditors.
Chapter 11: Chapter 11, normally used by partnerships and corporations, allows them
to continue operating as "going concerns" while they pay former
creditors on a court-approved schedule.
Chapter 13 : For individuals, also called a “wage earner plan” as it allows the debtor to pay an agreed-upon percentage of creditor balances over three to five years, after which any remaining balances are erased. Some debts cannot be discharged in a Chapter 13 bankruptcy, such as long-term obligations (home mortgage), student loans, alimony, or child support.