There are four types of bankruptcy cases provided under the law:
- Chapter 7 is known as straight bankruptcy or liquidation. It requires a debtor to give up property which exceeds certain limits called exemptions, so the property can be sold to pay creditors.
- Chapter 11, known as reorganization, is used by businesses and a few individual debtors whose debts are very large.
- Chapter 12 is reserved for family farmers and fishermen.
- Chapter 13 is called debt adjustment. It requires a debtor to file a plan to pay debts (or parts of debts) from current income.
Most people filing bankruptcy will want to file under either Chapter 7 or Chapter 13. Either type of case may be filed individually or by a married couple filing jointly.