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 There are many provisions of the Bankruptcy Code that may affect your situation. These Frequently Asked Questions and the brief answers contain only general principles of law and are not a substitute for legal advice. If you have questions or need further information as to how the bankruptcy laws apply to your specific case, you should consult with a bankruptcy lawyer. For individuals, there are four types of bankruptcy available. Which type is best for your specific situation should be determined by a bankruptcy lawyer, after you have provided him or her with all relevant information. Generally, the four types of bankruptcy available to individuals are referred to by the number of the Chapter in the Bankruptcy Code which creates it. They are Chapter 7, Chapter 11, Chapter 12 and Chapter 13. As a practical matter, most individuals will wind up using either Chapter 7 or Chapter 13. Chapter 7 is that part (or chapter) of the Bankruptcy Code that deals with liquidation. The Bankruptcy Code is that part of the federal laws that deal with bankruptcy. A person who files under chapter 7 is called a debtor. In a chapter 7 case, the debtor must turn his or her nonexempt property, if any exists, over to a trustee, who then converts the property to cash and pays the debtor's creditors. In return, the debtor receives a chapter 7 discharge, if he or she pays the filing fee, is eligible for such a discharge, and obeys the orders and rules of the court. Chapter 11 is the reorganization chapter most commonly used by businesses, but it is also technically available to individuals. It is expensive to file ( $800 filing fee) and requires frequent reporting to the court, so the legal expense is significantly higher than either Chapter 7 or Chapter 13. The debtor proposes a plan of financial reorganization. Creditors vote on whether to accept or reject the plan, which also must be approved by the court. While the debtor normally remains in control of any assets, the court can order the appointment of a trustee to take possession and control of the business. Chapter 12 offers bankruptcy relief to those who qualify as family farmers. Family farmers must propose a plan to repay their creditors over a three-to-five year period and it must be approved by the court. Plan payments are made through a chapter 12 trustee, who also monitors the debtors' farming operations during the pendency of the plan. Chapter 13 generally permits individuals to keep their property by repaying creditors out of their future income. Each chapter 13 debtor writes a plan which must be approved by the bankruptcy court. The debtor must pay the chapter 13 trustee the amounts set forth in their plan. Debtors receive a discharge after they complete their chapter 13 repayment plan. Chapter 13 is only available to individuals with regular income whose debts do not exceed $1,000,000 ($250,000 in unsecured debts and $750,000 in secured debts).
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