Chapter 7 – “The Liquidation Chapter”
Who Can File? Individuals, partnerships, corporations
Why File? If you have no hope of regaining your financial situation and you seek relief from creditors, this option is for you. You will receive a “fresh start.”
What Happens? In most Chapter 7 asset cases, the debtor’s estate is liquidated under the rules of the bankruptcy code. This means that all non-exempt property is sold for cash by a trustee and the proceeds are distributed to creditors. All dischargeable debts will be forgiven and the petitioner can choose to keep their car and home.
Chapter 11 – “The Reorganization Chapter”
Who Can File? Corporations, partnerships and some individuals
Why File? A Chapter 11 Bankruptcy allows the debtor to reorganize their debts so they are more manageable without having to liquidate their assets.
What Happens? The debtor will present a plan to creditors, which, if approved by the court and accepted by the creditors, will allow the debtor to reorganize personal, financial or business affairs so that they can again become a financially productive individual or business.
Chapter 13 – “The Wage Earner / Reorganization Chapter”
Who Can File? An individual with regular income who is overcome by debts
Why File? The debtor will be under the court’s protection while repaying debts, as stipulated by a plan created by the debtor and approved by the creditors.
What Happens? Chapter 13 allows the debtor to file a plan in which he or she agrees to pay a certain percentage of future income to the bankruptcy court trustee for payment to creditors.