Bankruptcy is a uniform, federal court-supervised procedure to relieve individuals and businesses from debts, while protecting and preserving the rights of secured creditors and providing unsecured creditors with equal treatment of their claims.
There are four types of bankruptcy that individuals may select, depending on their particular financial circumstances. Most individuals file under Chapter 7 of the Bankruptcy Code (the Code), sometimes known as “straight” or “liquidation” bankruptcy. Chapter 11 is available to individuals, but generally is used by corporations to reorganize their business affairs. Chapter 12 is designed for use by farmers. Chapter 13, also referred to as a “wage-earner” or “debt-adjustment” plan, is available to individuals and unincorporated businesses that intend to use future income to pay some or all of one’s debts according to a plan designed by the individual (within certain statutory limitations) to meet his or her needs.
