Bankruptcy law consists of six different chapters under which individuals or organizations may file. A "chapter" refers to the section of federal law that provides the rules for how a bankruptcy case is to be decided. These six chapters are:
Chapter 7: Liquidation for Individuals or Businesses
Chapter 9: Municipal Bankruptcy
Chapter 11: Reorganization for Individuals or Businesses
Chapter 12: Reorganization for Family Farmers or Fisherman
Chapter 13: Reorganization for Individuals only
Chapter 15: International or Ancillary Cases
Of these, an individual may file for bankruptcy protection under one of four Chapters: 7, 11, 12, or 13.
Chapter 7: Nearly all individuals file under this chapter.
Chapter 11: Very expensive and creditors control the case
Chapter 12: Can only be used by farmers or fisherman
Chapter 13: Used by people who either do not qualify for, or who have too much equity to lose by filing, a Chapter 7 case, and/or who can benefit best by some of the special features of Chapter 13.
Essentially, therefore, an individual's choice of bankruptcy is between Chapter 7 and 13. Since Chapter 13 is a repayment plan with many additional costs and risks (see the Chapter 13 page for more details), most people who qualify for Chapter 7 use that form of bankruptcy rather than Chapter 13.
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