There are four types of bankruptcy cases provided under the law:
1. Chapter 7 is known as “straight” bankruptcy or “liquidation.” It requires a debtor to give up property which exceeds certain limits called “exemptions,” so the property can be sold to pay creditors.
2. Chapter 11, known as “reorganization,” is used by businesses and a few individual debtors whose debts are very large.
3. Chapter 12 is reserved for family farmers and fishermen.
4, Chapter 13 is called “debt adjustment.” It requires a debtor to file a plan to pay debts (or parts of debts) from current income.
Most people filing bankruptcy will want to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly.
If your income is above the median income for a family the size of your household in your state, you may have to file a chapter 13 case. A higher-income consumer must fill out “means test” forms requiring detailed information about income and expenses. If, under standards in the law, the consumer is found to have a certain amount left over that could be paid to unsecured creditors, the bankruptcy court may decide that the consumer can not file a chapter 7 case, unless there are special extenuating circumstances.