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Explaining The Different Types Of Bankruptcy Cases
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There are four types of bankruptcy cases provided under the law:
- Chapter 7 is a “straight” bankruptcy or “liquidation,” which requires an individual to give up property which is not “exempt” under the law, so the property can be sold to pay creditors. Generally, those who file chapter 7 keep their property except that property which is very valuable or which is subject to a lien which they cannot avoid or afford to pay.
- Chapter 11 is known as “reorganization,” and is used by businesses and a few individuals whose debts are very large.
- Chapter 12 is bankruptcy for family farmers and fishermen.
- Chapter 13 is the bankruptcy of “reorganization” and is used by persons to pay all or a portion of their debts over a period of years using their current income.
Most people who need bankruptcy will be eligible to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly.
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