Bankruptcy laws in the United States are governed by federal government and the federal law bestows individuals, business and even towns and cities with a legal right to file bankruptcy. There are six important types of bankruptcies that one needs to know about if he/she is seeking to file bankruptcy. However, you must always remember that any kind of bankruptcy proceeding should only be the last resort and should only be considered when all other efforts of getting out of debt have not been of any use.
Chapter 7
Also known as liquidation bankruptcy, it can be declared by both individuals and businesses. Chapter 7 basically is meant to forgive all debts by analyzing the debtor's situation. The debtor gains by getting shielded from any responsibility that require him/her to pay money but his other liquid incomes may get seized any time. It may also spoil a person's credit-rating because of which he may not be able to exercise his social freedom at times.
Chapter 13
Bankruptcy under Chapter 13 is also known as Adjustment of Debts. It can only be filed by individuals who have a current reliable income and are capable of paying a portion of their income to settle the debt. This whole procession is carried in the supervision of court and the person also remains protected from unnecessary chase of creditors. It is a good option if you're ready to settle your loans by not paying a high price of interest. Another advantage is the extra time you get for settling the loans. You also get to keep your liquid assets like bonds, jewelry etc. with you.
Chapter 11
Bankruptcy under Chapter 11 is filed by wealthy individuals, generally to belong to business class. The procession of bankruptcy is similar to that of Chapter 13 but in this case the court allows the companies and to recognize and detail their assessments so that a way to settle the debt can be found out.
Chapter 9
Bankruptcy under Chapter 9 is also similar to that of Chapter 13 and Chapter 11 but the chapter generally applies to municipalities that are considering redevelopment. A good example would be Orange country, California that had declared Chapter 9 in the year 1994.
Chapter 12
This chapter is reserved for fishermen and farmers. This allows reconstruction of debt and keeping a little amount of assets securely.