Types of Bankruptcy
For consumers, the types of bankruptcy cases that would be of most interest would be cases filed under Chapter 7 or Chapter 13 of the U.S. Bankruptcy code, with the most common being Chapter 7.
It is referred to as liquidation and involves the appointment of a trustee to review your financial situation and to decide if you have any non-exempt property that can be used to pay creditors. You are allowed to exempt a certain amount of your assets. There are certain eligibility requirements for a Chapter 7; for example, your household income needs to be under a certain amount that is established by the government.
If your income exceeds the amount that would allow you to file a Chapter 7, or you have some excess income at the end of each month, then a Chapter 13 case may be more appropriate. In a Chapter 13, you would pay your excess income to the trustee, who would then use it to pay creditors, even if it means that creditors would receive a fraction of the total debt owed to them.
Chapter 11 cases are usually a greater point of interest to businesses who wish to utilize the bankruptcy laws to reorganize. In a Chapter 11, a business may continue to operate while working a plan to pay their creditors, usually in a reduced amount.