There are four different kinds of bankruptcy cases, each with its own chapter in the <a title="Title 11, United States Code (Bankruptcy Code)" href="http://uscode.house.gov/download/title_11.shtml" target="_blank">bankruptcy code</a>. They are: Chapter 7, Chapter 11, Chapter 12, and Chapter 13. Most consumer debtors use Chapter 7 or Chapter 13.

<strong>Chapter 11</strong> is designed for corporate re-organizations, really, but it can be used by some individuals with complex cases. Most of the business bankruptcies that we read about in the paper and hear about on TV are Chapter 11 cases. Chapter 11 is much more complicated than the other chapters, and Chapter 11 cases are much more expensive B for example, the filing fee alone is a thousand dollars, over three times the others.

<strong>Chapter 12</strong> is much like Chapter 13 but designed for, and limited to, family farmers and fishermen.

Most consumer bankruptcies are under either Chapter 7 or Chapter 13. To understand the differences, we must first understand two important legal concepts: first, <a title="Secured vs. Unsecured Debt" href="http://johnbodlelaw.com/bankruptcy-basics/what-is-bankruptcy-2/secured-vs-unsecured-debt/">the difference between a secured debt and an unsecured debt</a>; second, <a title="Exempt vs. Non-exempt Property" href="http://johnbodlelaw.com/bankruptcy-basics/what-is-bankruptcy-2/exempt-property/">the difference between exempt and non-exempt property</a>.

Bankruptcy addresses mostly unsecured debt; most secured debt is not affected.

Chapter 7 is the straight-forward liquidation -- the simplest form of bankruptcy. Fundamentally, in a Chapter 7, the first thing we do is divide all your property into <a title="Exempt vs. Non-exempt Property" href="http://johnbodlelaw.com/bankruptcy-basics/what-is-bankruptcy-2/exempt-property/" target="_blank">exempt property and non-exempt property</a>. The exempt property is yours to keep (but you must pay any debts secured by that property). Exempt property, if any, is given to the Trustee, who sells it and distributes the proceeds to the unsecured creditors. A few months later, the court issues its Order of Discharge and you get your fresh start. (Not all debts can be discharged. You must pay debts secured by property you wish to keep -- whether that property is exempt or not B and some special debts, such as student loans and most taxes, are not dischargeable even though they are unsecured.)

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