is a legal process that allows individuals or businesses to eliminate or repay their debts under the protection of the court. There are several different types of bankruptcy, each designed to address specific financial situations. The most common types of bankruptcy in the United States are Chapter 7, Chapter 13, and Chapter 1
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also known as liquidation bankruptcy, is the most common type of bankruptcy for individuals. It involves the liquidation of non-exempt assets to repay creditors. A court-appointed trustee sells the debtor’s non-exempt assets and distributes the proceeds to creditors. However, certain assets, such as a primary residence, vehicle, and necessary personal belongings, may be exempt from liquidation. Chapter 7 bankruptcy typically lasts for a few months, and at the end, most remaining debts are discharged, meaning the debtor is no longer legally obligated to repay them.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, also known as reorganization bankruptcy, is designed for individuals with a regular income who want to repay their debts over time. Under Chapter 13, the debtor proposes a repayment plan to the court, which typically spans three to five years. The plan outlines how the debtor will use their income to repay creditors. Chapter 13 allows debtors to keep their assets while catching up on missed payments, such as mortgage or car loan arrears. At the end of the repayment plan, any remaining eligible debts may be discharged.
Chapter 11 Bankruptcy
Chapter 11 bankruptcy is primarily used by businesses but can also be utilized by individuals with substantial debts. It allows the debtor to reorganize their finances while continuing their operations. Chapter 11 bankruptcy involves creating a plan to repay creditors over time, similar to Chapter 1