The Road Out of Debt: Bankruptcy and Other Solutions to Your Financial Problems

Chapter 15. Overview of Bankruptcy Types

Bankruptcy is a remarkable phenomenon. It is financial death and financial rebirth. Bankruptcy laws literally make debts vanish.

—Sullivan, Theresa A., Elizabeth Warren, and Jay Lawrence Westbrook (Beard Books, Washington, D.C. 1999).

Bankruptcy cases are all over the news these days as more and more companies and people are filing for bankruptcy protection. You've probably heard bankruptcy cases described as Chapter 7, Chapter 11, or Chapter 13, but what does that mean? Understanding the types, or chapters, of bankruptcy is an important step in deciding whether bankruptcy is right for you. Chapter 7 bankruptcy is the most common but that does not necessarily mean you should file a Chapter 7 bankruptcy.

This chapter is an overview of the different types of bankruptcy relief you can choose to fit your particular circumstances. But first, take the "Do You Know the Bankruptcy Basics?" quiz to test your knowledge.

Quiz: Do You Know the Bankruptcy Basics?

1. What types of debt make you the best candidate for Chapter 7 bankruptcy?

   1. Credit card debt

   2. Medical bills

   3. Mortgage loans

   4. Student loans

   5. All of the above

      Answer: A and B

      Chapter 7 bankruptcy, as you will learn in this chapter, allows you to extinguish (discharge) certain debts, such as high credit card debt and legal or medical debt that you don't think you'll ever be able to pay back. Other types of debt, such as mortgage debt, student loans, and alimony, are not discharged in the typical Chapter 7 bankruptcy. ...