Explanation of Different Types of Bankruptcy

While most consumers filing bankruptcy opt for Chapter 7 or Chapter 13, some self-employed individuals or business owners opt to declare Chapter 11, according to both the United States Bankruptcy Court and the book "How to File for Chapter 7 Bankruptcy."

Chapter 7 Function

Chapter 7 is a debt forgiveness type of bankruptcy that permanently eliminates a consumer's obligation to repay existing bills such as credit cards and medical bills, according to "How to File for Chapter 7 Bankruptcy."

Chapter 13 Function

In Chapter 13, a debtor partially repays his credit cards, loans and other bills like medical debts under court supervision, according to the United States Bankruptcy Court.

Chapter 11 Function

Chapter 11 is similar to Chapter 13 in that it is a restructuring type of bankruptcy, according to both the United States Bankruptcy Court and "How to File for Chapter 7 Bankruptcy." But this option works best for self-employed people or business owners who want to protect all personal and business assets while only partially repaying creditors.

References

• "How to File for Chapter 7 Bankruptcy"; Stephen Elias, Albin Renauer and Robin Leonard; 2009
• U.S. Courts: Chapter 13
• U.S. Courts: Chapter 11