What are the different bankruptcy chapters under which an individual can file?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 15, 2021

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There are three different bankruptcy chapters under the Bankruptcy Code through which an individual can file, and they are called Chapter 7, Chapter 11, and Chapter 13 bankruptcy. A Chapter 7 case is sometimes called a “straight” bankruptcy, or a “liquidation.” In Chapter 7, a court-appointed trustee sells your non-exempt assets and distributes the proceeds amongst your creditors.

In Chapter 13, you file a plan that obligates you to pay some or all of your debts over a multiyear period. Under the new bankruptcy law, many consumer debtors will be required to file a Chapter 13 bankruptcy and commit to a 5-year repayment schedule.

Chapter 11 is primarily used by businesses that need to reorganize in order to get out from under debt, but is also theoretically available to consumer debtors. (K-Mart and WorldCom are examples of two “big” names who have filed under Chapter 11.) In chapter 11, the debtor proposes a plan for paying some or all of his debts, and his creditors get a chance to vote on whether to accept or reject that plan. In some cases, it may be possible to “cram down” a plan against a dissenting class of creditors. Chapter 11 may be the only recourse for a consumer debtor with an extremely large mortgage that causes his secured debt to exceed the limit for Chapter 13.

A special chapter – Chapter 12 – is available to family farmers and under the new bankruptcy law now covers family fishermen. It was very similar to chapter 13, but without limits on the amount of debts. The new bankruptcy law made significant changes in Chapter 12.

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