There are several different types of bankruptcy, and deciding which is right for you is a complicated decision. You should always contact a bankruptcy attorney to help you first determine if you even need to file bankruptcy and then to figure out which chapter of bankruptcy is best for your situation. If you are doing research on your own prior to deciding if bankruptcy is right for you, this is a good place to start. Here is a short description of each type of bankruptcy and who can file for them.
Chapter 7 is considered liquidation type of bankruptcy. In this chapter, all eligible assets will be sold off and the money from those sales will be divide up among all of your lenders. Which assets may be exempt will vary, but usually you can keep your home and cars if their value is under a certain amount. That amount may vary from state to state. It is important that you hire a bankruptcy attorney that can help you figure out the paper work and determine which assets you may be eligible to keep. If you are at risk of foreclosure, Chapter 7 might be able to delay the sale of your home. This chapter can be filed for by both businesses or by individuals.
Chapter 11 bankruptcy is a restructuring bankruptcy that is available only for businesses. Any size business can file for Chapter 11 as long as they meet the financial requirements, but it is most often used by large corporations. In this type of bankruptcy, the company will change the way it runs in order to run more efficiently. Branches that are not making a profit may be closed or sold off, or unprofitable product lines may be terminated. The debtor will then make monthly payments over a period of time (usually less than 5 years). A portion of the debt is paid off, the rest is discharged. This type of bankruptcy allows the business to stay open and learn to run more efficiently without losing any of its assets.
Chapter 13 bankruptcy is also a restructuring bankruptcy but only individuals are eligible to file. You may be eligible for this type of bankruptcy if you have a job but still cannot pay your bills. If interest rates and late fees are making it impossible for you to keep up with your bills, then Chapter 13 might be for you. In this type of bankruptcy your debts will be bundled into affordable monthly payments. You and your creditors will agree on a payment plan over several years. At the end of the payment term the rest of your debt will be discharged. This type of bankruptcy will protect your credit score more than Chapter 7 because you will pay back some of your debt and only a portion will be discharged. In Chapter 11 you will keep all of your assets.