What are the different types of bankruptcy?

The U.S. Bankruptcy Code allows individuals to file for bankruptcy under one of several different types, or ‘chapters’. In Washington, the four most common types of bankruptcy are Chapter 7, Chapter 11, Chapter 12, and Chapter 13. Chapter 7 bankruptcy is the most common form of bankruptcy in Washington and is designed to provide consumers with a fresh start. Through Chapter 7, debtors can liquidate or sell their assets to pay off their creditors. This is usually done through the court-appointed trustee. Chapter 7 provides the best option for consumers who are excessively in debt and behind on payments. Chapter 11 bankruptcy is typically used by large businesses and organizations that wish to reorganize their debt and assets. Through this process, the debtor will develop and submit a plan, known as a reorganization plan, to the court. If the court approves it, the debtor is able to continue to operate while repaying their creditors. Chapter 12 bankruptcy is designed to help family farmers and fishermen who have a regular income to repay all or part of their debts over time. This chapter can only be filed by individuals or married couples. Chapter 13 bankruptcy enables individuals to repay all or part of their debt over a period of three to five years and is often called a wage-earner’s plan. This chapter requires individuals to have a steady source of income in order to repay their creditors. Each of the four types of bankruptcy have different requirements and may be a better option for different debtors depending on their specific financial situation. It is important for those considering filing for bankruptcy to speak with a qualified legal professional to determine which type of bankruptcy would be the best option for them.

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What are the different types of bankruptcy?

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