Bankruptcy is divided into chapters.  Instead of talking about types of bankruptcy, bankruptcy chapters are discussed.  The type of bankruptcy you file depends on what chapter you qualify for.  Here we will discuss the 4 main chapters or types of bankruptcy.

Chapter 7 bankruptcy is one of the types of bankruptcy that you are probably most familiar with that is very common.  When you think of bankruptcy, you probably think of chapter 7.

In this chapter, you submit your petition and are appointed a trustee.  This trustee will go through your assets to see which are liquid and that are not exempt.  They then liquidate them and use the money to pay as many of the debts as possible.  They may then discharge the remainder of the debt.  Some debts are not dischargeable like student loans, alimony, child support, etc.

It is harder to file for chapter 7 bankruptcy than it once was.  While most people wish they could just erase their debts away, it is not always an option.  Most have to file chapter 13.

Chapter 13: Reorganization.

With chapter 13 bankruptcy, your debts are not discharged.  You are appointed a trustee as before, but instead of liquidating your assets and discharging your debts, your debts are consolidated with them.

This is how it works:  They will take over your debts and pay them for you.  You will pay periodic payments to the trustee.  You are allowed to keep all your property but are able to manage these new payments to the trustee more easily.

With this type of bankruptcy, you are able to keep your property and will continue to pay secured debts, such as mortgages, on your own.  This is especially desirable for those with a certain lower amount of debt who wish to retain their property and assets.

Chapter 12 is very similar to 13 but it is for family farmers.  Farmers prefer this of the types of bankruptcy because they are able to keep their property which is important in the case of a farm.

Chapter 11

Chapter 11 is the final of the types of bankruptcy we are going to discuss.  It is usually meant for businesses or corporations.  Those who have more in debt than typical to file chapter 13 often file chapter 11.

With this chapter, most can continue to run their business and hold on to their property.  That is what you want if you have a business because there would really be no way to survive a bankruptcy when your property and assets are taken away.

Which of these Types of Bankruptcy should you Use?

Well, first you need to understand that bankruptcy is even the right choice.  Just because you have debt, doesn't automatically mean you should declare bankruptcy.  The better choice is to pay off your debt on your own because it will help you to begin repairing your credit right from the start and you won't have bankruptcy on your record for the next ten years.

Basically, you just need to go through the different types of bankruptcy and decide which one is right for you.  If you aren't sure, talk with a lawyer to discuss your options further.