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What are the types of personal bankruptcy? The three main types of personal bankruptcy are Chapter 7 (liquidation bankruptcy), Chapter 13 (repayment plan bankruptcy), and Chapter 11 (reorganization, typically for high-income individuals). According to the U.S. Courts, over 95% of individual filers choose either Chapter 7 or Chapter 13, with each offering distinct paths to financial freedom based on income, assets, and debt types.
Bankruptcy Types Overview: Understanding Your Options
If you’re drowning in debt and exploring relief options, understanding what are the types of personal bankruptcy is your first step toward financial freedom. Each bankruptcy chapter serves different financial situations, and choosing the right one can mean the difference between losing assets or keeping your home. This guide breaks down Chapter 7, Chapter 13, and Chapter 11 bankruptcy options, helping you identify which debt relief path aligns with your income, assets, and long-term financial goals. You’ll discover how each bankruptcy type handles debt discharge, what the filing process involves, and which option provides the fresh start you need.
Chapter 7 bankruptcy, often called “liquidation bankruptcy,” eliminates most unsecured debts within 3-4 months. This fast-track option works best for individuals whose income falls below their state’s median or who pass the means test established by the Bankruptcy Abuse Prevention and Consumer Protection Act.
The U.S. Trustee Program oversees Chapter 7 cases, where a court-appointed trustee reviews your assets. Most filers keep their property through exemptions that protect essentials like your home equity (up to state limits), vehicle, retirement accounts, and personal belongings. You’ll discharge credit card debt, medical bills, and personal loans, though student loans and recent tax debts typically remain.
Chapter 7 suits individuals with limited income and few non-exempt assets. The entire process costs approximately $338 in filing fees plus attorney costs, and you’ll receive a debt discharge that stops creditor harassment permanently.
Chapter 13 bankruptcy creates a 3-5 year court-approved repayment plan, allowing you to keep valuable assets while catching up on secured debts. This option works for individuals with regular income who exceed Chapter 7’s means test or want to save their home from foreclosure.
Your monthly payment depends on disposable income, debt types, and asset values. You’ll pay priority debts like taxes and child support in full, while unsecured creditors receive whatever your income allows—sometimes just pennies on the dollar. After completing your plan, remaining eligible unsecured debts receive discharge.
Chapter 13 particularly benefits homeowners facing foreclosure, as it stops foreclosure proceedings and lets you spread missed mortgage payments across your plan. You’ll also protect co-signers, consolidate debt payments into one manageable amount, and potentially reduce car loan balances through “cramdown” provisions. The filing fee is $313, and you must complete credit counseling before filing.
While primarily designed for businesses, Chapter 11 bankruptcy serves individuals whose debts exceed Chapter 13’s limits ($2,750,000 combined for secured and unsecured debt as of 2024) or who need more flexible reorganization terms.
Chapter 11 lets you propose a repayment plan without income restrictions, maintain business operations, and restructure significant debt loads. However, it’s considerably more expensive and complex than other personal bankruptcy types, requiring substantial legal fees and court oversight. Most individuals only pursue Chapter 11 when they own substantial assets or operate businesses as sole proprietors.
Selecting from the types of personal bankruptcy depends on your income stability, asset protection needs, and debt composition. Chapter 7 offers quick debt discharge for lower-income individuals, Chapter 13 provides structured repayment with asset protection, and Chapter 11 handles complex, high-value situations. Each path leads to the same destination: relief from overwhelming debt and a genuine fresh start. Your specific financial circumstances—from income level to home equity—determine which bankruptcy type provides optimal debt relief while protecting your future financial security.
Free Bankruptcy Evaluation Available
Don’t navigate these critical financial decisions alone. Every day without action means continued creditor harassment, mounting interest, and increased financial stress. A qualified bankruptcy attorney can analyze your specific situation, determine which type of personal bankruptcy fits your needs, and guide you through the filing process. Get your free bankruptcy evaluation today and take the first step toward financial freedom.
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Chapter 7 and Chapter 13 account for over 95% of personal bankruptcy filings, with Chapter 7 being most common for lower-income individuals and Chapter 13 preferred by those with regular income who want to keep assets.
You can choose Chapter 13 voluntarily, but Chapter 7 requires passing the means test that compares your income to your state’s median income level for your household size.
Chapter 13 bankruptcy specifically helps homeowners stop foreclosure and catch up on missed mortgage payments through a repayment plan, while Chapter 7 may protect your home if equity falls within your state’s homestead exemption.
Chapter 7 typically completes in 3-4 months with debt discharge, while Chapter 13 requires 3-5 years of plan payments before receiving final discharge of remaining eligible debts.
Most student loans, recent tax debts, child support, alimony, and debts from fraud or willful injury cannot be discharged in Chapter 7, Chapter 13, or Chapter 11 bankruptcy.
What Are the Types of Personal Bankruptcy and Which One Fits Your Financial Situation? What are the types of personal
