What is the difference between Chapter 7, Chapter 11, and Chapter 13?

Chapter 7 bankruptcy is generally used by individuals who have an income that is below the median income for their state, and have minimal, if any, assets. Under Chapter 7, burdensome debt can be erased usually within 3 ½ months and the debtor can keep his assets if they are below the amount allowed in his/her jurisdiction (called exemptions ). If an individual files for Chapter 7 with assets above those allowed, the bankruptcy trustee will liquidate those additional assets to pay off as much of the debt as possible before discharging the balance.

Chapter 11 bankruptcy is generally used by businesses in order to reorganize the business.

Chapter 13 bankruptcy is generally used by individuals who have a regular source of income above the income amount allowed under Chapter 7 ( median income ) and assets above the amount allowed ( exemption ), but are still unable to pay their bills on a timely basis. A chapter 13 bankruptcy allows such an individual to repay all or most of his/her total debts on an extended schedule (3-5 years). Generally, the debts that are not paid off during that period are discharged at the end of the 5 years if payments are kept up during the plan.

There are also Chapter 9 and Chapter 12 bankruptcies for municipalities and family farmers respectively.