file for bankruptcy

The Different Kinds of Bankruptcy

On October 17, 1995, the US Bankruptcy Law was amended and some changes took effect. In the past, anyone who wished to file for bankruptcy because he/she couldn’t pay off creditors could simply do so without questions. Today however, there are certain procedures that you must go through before he/she can be completely discharged from their debt .

First, a person needs to complete a credit counseling course with an accrediting agency before he/she can proceed with the filing. During credit counseling, he/she may be advised to pursue other solutions such as debt consolidation or debt settlement. If the counseling agency recommends bankruptcy as the best solution, then that’s the time he/she can start the preparations for bankruptcy.

There are basically two types of bankruptcy for consumers and theseBankruptcy sign are Chapter 7 and Chapter 13. Let’s remember that only a Chapter 7 completely discharges the borrower from debt repayment. Meanwhile, a Chapter 13 subjects the borrower under a mandatory repayment program for 5 years.

How does the bankruptcy court decide which Chapter of bankruptcy is appropriate? The applicant will be required to take the Income Means Test Calculation to determine whether he/she is still capable of repayment.

If the result of the Income Means Test falls below $6,000, the borrower qualifies for Chapter 7 Bankruptcy. On the other hand, if the result of the Income Means Test is at least $6,000 or more, the borrower qualifies for Chapter 13 Bankruptcy. Under the 5-year repayment plan 10% of his/her monthly salary will be automatically deducted as payment for his debts.

Other Kinds of Bankruptcy

Other Chapters of Bankruptcy are Chapter, 9, 11 and 12. Chapter 9 is a bankruptcy provision for municipalities, public agencies or a group of people. Chapter 11 is a bankruptcy is a provision for business corporations.

Lastly, Chapter 12 bankruptcy is for family farmers and fishermen. If you are a farmer or a fisherman, you can file for a Chapter 12 and you will be protected from asset liquidation. This means a farmer or a fisherman can retain his assets or livelihood after being discharged from his debts.


  1. I agree. A truly well written article. Very helpful to people who might not know the changes and amendments of laws..

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  2. Great overview of the different kinds of bankruptcy options that are now available! So many people don’t understand that they can’t file Chapter 7 as easily as they once could! Chapter 13 is certainly a more painful option for most people!

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  3. Thank you for the incredible amount of detail in this article. I literally started this article with little to no knowledge of the different types of bankruptcy, but I feel far more informed now. Having said that, I think that I might need to do a little more reading around the topic. There seems to be a lot of detail and information around this topic.

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