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  • Writer's pictureJon-Michael Murphy Attorney at Law

What are the Different Types of Bankruptcy



Chapter 7 - Liquidation:

- Chapter 7 bankruptcy is primarily for individuals, but businesses may file.

- The primary purpose of a Chapter 7 is to have debts discharged (wiped out).

- Individuals must qualify for a Chapter 7 by, among other things, passing the means test.

- In Chapter 7, and other bankruptcy chapters, some debts may not be dischargeable; such as, most taxes; most student loans; most domestic support obligations; most fines and criminal restitution obligations.

- In a Chapter 7 any unexempt property could be sold to pay creditors.


Chapter 13 - Repayment

- Chapter 13 bankruptcy is primarily for individuals with regular income.

- If an individual makes too much to qualify for a Chapter 7, has unexempt property that could be sold in a Chapter 7, or is behind on their mortgage or automotive payments Chapter 13 may be the best option.

- A Chapter 13 bankruptcy typically last between 3 – 5 years.

- In a Chapter 13 individuals pay all or a portion of their debt and any debt remaining at the end of the plan may be discharged.


Chapter 11 - Reorganization

- Chapter 11 bankruptcy is primarily for businesses.

- If a business is in debt but wants to continue to operate than Chapter 11 may be the best option.

- Within Chapter 11 there is a  Subchatpter V, which is for businesses that qualify as a “small business” under the bankruptcy code.


Chapter 12 - Farmer's & Fisherman's Repayment Plan

- Chapter 12 is designed for family farmers or family fisherman with regular income.

- In a Chapter 12 the farmers or fisherman repay all or a portion of their debt over three to five years.

-  A Chapter 12 eliminates many of the barriers that farmers or fisherman would face trying to file under a Chapter 11 or Chapter 13.

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