Chapter 7 - Liquidation
A bankruptcy filed under chapter 7 is also called liquidation, although in most cases, the debtor can retain most or all of their property so long as the property is exempt. Any non-exempt property may be possessed by the chapter 7 trustee. The non-exempt assets may be converted to cash and distributed creditors. After filing for relief, an individual debtor may receive a discharge of debts.
However, some debts are non-dischargeable. They include certain taxes, student loans, alimony, and child support.
Chapter 11 - Reorganization
A bankruptcy filed under Chapter 11 is a reorganization of the debtor's financial obligations, in which the the debtor may continue to operate in a normal course under a court approved plan of reorganization. Creditors of a business filing a chapter 11 vote on the repayment plan and the plan must be approved by the court. The advantage of chapter 11 is if a trustee is not appointed, the individual or business maintains control of its property during the bankruptcy and allow time to deal with creditors and to negotiate a plan of repayment.
Chapter 12 - Family Farmer Debt Adjustment
Chapter 12 is specifically for farmers, so they can reorganize their debts while keeping their land and farming business. Chapter 12 may enable the farmer debtor to pay the creditors a portion of what is owed under the terms of a court approved repayment plan. A trustee is appointed, but the farmer usually remains in possession of the farm while formulating a plan.
Chapter 13 - Repayment plan
Chapter 13 may enable an individual debtor with a regular income the opportunity to pay back debts using their income and enabling a debtor to keep certain assets. A person who owns a small business as a sole proprietor may also file under this chapter. Under a chapter 13 bankruptcy filing, the debtor must file a repayment plan and obtain the court's approval of the plan. A creditor may object to the plan. The debtor must work out any objections to the plan before the court will approve it. The typical repayment period of a chapter 13 is 3 to 5 years. The debtor makes regular payments to the trustee and the trustee distributes these monies to creditors according to the terms of the plan. After completion of the plan, the debtors debts are discharged and the debtor is no longer obligated to pay them.
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