What are the types of bankruptcy?
ANSWER:
There are different types of bankruptcies, usually referred to by their chapter in the U.S. Bankruptcy Code. Most bankruptcy filings by individuals are Chapter 7 or Chapter 13 filings.
A Chapter 7 bankruptcy filing is a liquidation proceeding. The debtor’s non-exempt assets, if any, are sold by the Bankruptcy Trustee and the proceeds are distributed to creditors according to the priorities among creditors as established by law.
A Chapter 13 bankruptcy is a repayment plan protecting the debtor from collection action during the case. Chapter 13 is also known as a wage earner’s plan. The debtor keeps his property and makes regular payments to the Trustee out of future income to pay creditors over a period of time, generally 3 to 5 years. Repayment amounts in a Chapter 13 bankruptcy depend upon the debtor’s income and the types of debt but usually will be less than the full amount of the debt.