Bankruptcy Basics

There are 5 chapters that one may file bankruptcy under the bankruptcy code (they are called chapters after the chapter of the code they come from). Chapter 7 - Liquidation, Chapter 9 - Municipality, Chapter 11 - Business Reorganization, Chapter 12 - Family Farmer Reorganization, and Chapter 13 - Consumer Reorganization. Chapter 9 is only available to municipalities and I will not be covering this chapter.

General information about bankruptcy. Regardless of whether you file a chapter 7, 11, 12, or 13, there are many aspects of bankruptcy that are the same for all of these types of bankruptcy. For example, you will receive a discharge for all of your unsecured debts, aside from debts that are deemed nondischargeable, once the discharge is granted. The types of debts that are nondischargeable are basically the same across chapters as well. Primarily, these would be child support and other similar types of obligations, student loans and any debt that was the result of fraud or conversion. There are some differences between what is dischargeable in a chapter 7 and a chapter 13, however. If you own a corporation or LLC, it is important to know that a corporation or LLC cannot get a discharge of debt in a chapter 7, but can get a discharge of debt in a chapter 11.

It is important for individuals to know that if they are to file a bankruptcy, regardless of the chapter, they are required to complete a credit counseling course prior to filing, and a debtor education course after filing, but before the discharge can be granted. A list of approved providers for these providers is available at

The similarities differ when it comes to how property is treated. As I mentioned, a chapter 7 bankruptcy is a liquidation, whereas the other chapters involve reorganizations. As a result, in a chapter 7 property that is not exempt is liquidated whereas in the other chapters most property is not liquidated. For further information on a specific chapter click on the corresponding links on the left.