What are the different types of bankruptcy?
Jan Meriss Alfonso Assistant at Ascent Law LLC There are several types of bankruptcy. Chapter 7 is the most common one and is called a liquidation bankruptcy. In this situation, a court-appointed trustee sells the debtor's assets and divides the proceeds among creditors. Chapter 7 can be a fresh start for a debtor, because it can eliminate most unsecured debt. However, if you have assets that cannot be liquidated, you may have to file for chapter 13 bankruptcy first. Chapter 11 and Chapter 12 Bankruptcy Chapter 11 bankruptcy is used by corporations and large businesses. Chapter 11 requires approval of a payment plan by creditors and the court. This option is usually best for companies with high assets. Chapter 12 bankruptcy is similar to chapter 11, but is for smaller businesses, such as a family farm. In this type, a payment plan is established for three or five years. Chapter 13 and Chapter 7 are similar in their approach to debt relief. They are both court-supervised proceedin...