The most commonly utilized types of bankruptcy include Chapter 7 and Chapter 13. Chapter 7 is known as a liquidation bankruptcy. If you choose this type, you’ll forfeit your non-exempt assets, which the trustee will then sell to pay off a portion of your debt. The remainder of your debt is discharged. If you own substantial assets, such as a home, and a regular income, your bankruptcy attorney may advise you to file a petition for Chapter 13 bankruptcy. Also known as debt reorganization, this type of filing restructures debt into a manageable payment plan. Debts that are not paid at the conclusion of the payment plan are discharged.
There are other types of bankruptcy, including Chapter 12, which is appropriate for family farmers. The process of debt discharge under Chapter 12 is much like that of Chapter 13. Businesses most often file under Chapter 11, which enables them to keep some assets while adhering to a debt payment plan. Municipalities may reorganize their debt under Chapter 9.