Bankruptcy

Chapter 7 The goal for individuals who file Chapter 7 is to free themselves of debt through a bankruptcy discharge. Although businesses normally do not receive a discharge, corporations and partnerships may use Chapter 7 to liquidate and close their business.

Chapter 11

Corporations, partnerships, and sole proprietors wishing to remain in business and reorganize their financial affairs may file Chapter 11. These debtors seek to restructure their debts, either by reducing the debt or by extending the time to repay. A Chapter 11 plan can also be used to liquidate all or a portion of a debtor's assets.

Chapter 12

Family farmers who receive more than half their income from farming operations and whose debts come primarily from farming operations qualify for Chapter 12. These debtors seek to restructure their debts, either by reducing the debt or by extending the time to repay. A Chapter 12 plan can also be used to liquidate all or a portion of a debtor's assets.

Chapter 13

Chapter 13 is for individuals with regular income who want to reorganize their financial affairs. The debtor proposes a repayment plan, say to catch up on the arrears on their home mortgage. Only individuals and sole proprietors are eligible for Chapter 13, which is simpler and much less expensive than a Chapter 11.

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