Chapter 7

• Chapter 7 is referred to as a full or total bankruptcy. When an individual files for a Chapter 7 bankruptcy, he allows the bankruptcy court to sell his assets and pay off the debts that the court, through an appointed trustee, considers the most important. The court then cancels all the debts from the time when the bankruptcy was first filed. States have varying exemptions that protect assets in a Chapter 7 -- for instance, some states may protect houses from being sold to pay off debts, but other states may not offer so much protection. When a business files for a Chapter 7, it is fully liquidated and closed, and its stock is canceled.
  
  

Chapter 13

• A Chapter 13 bankruptcy is a type of individual bankruptcy that gives people a more flexible payment option. Rather than seizing assets and selling them, the trustee creates a payment plan for the debtor to follow for up to 5 years, making payments toward the important debts so that creditors can collect at least some of what they are owed. Chapter 13 trustees can collect and sell certain assets, but not as many as in a Chapter 7, so debtors are able to keep most of their possessions. At the end of the payment plan, the court cancels any remaining debts from the time of filing.
  
  

Chapter 12

• Chapter 12 bankruptcy is a unique form of bankruptcy that can be used by family farmers. It is similar to a Chapter 13 bankruptcy, but it has several key differences. In addition to being restricted to certain types of farmers, a Chapter 12 is more lenient: The farm can keep all current possessions and property, which are often necessary to operate the farm. The payment plan assumes a future income and allows the farmer to pay creditors out of that income.
  
  

Chapter 11

• A Chapter 11 is a business bankruptcy designed for corporations (although some individuals with very large debts may also be eligible). It has some resemblance to a Chapter 13 -- the business can keep running, but it must reorganize itself with a new structure that makes room for a payment plan. All major business decisions and reorganization plans must be approved by both the bankruptcy court and a committee comprised of the major creditors of the business.