Bankruptcies can be called reorganizations or liquidations, depending on which type of bankruptcy you decide to do. Both a Chapter 7 and a Chapter 13 bankruptcy are federal court processes that are meant to assist businesses or consumers to get rid of their debt or to repay the debt with protection provided by the bankruptcy court.
A Chapter 7 bankruptcy is considered a liquidation. If you own property, it is sold (liquidated) and the profit is used to pay off as much of your debts as possible and leaving you with enough to start over.
A Chapter 13 bankruptcy is a reorganization and is by far the most common type of consumer bankruptcy. Consumers who file a Chapter 13 typically repay their debts over a period of three to five years under the protection of the bankruptcy court.
If you are considering bankruptcy, you should understand that both variations of bankruptcy have exceptions regarding which types of debts are covered, who is eligible to file for a bankruptcy and what property you will be allowed to keep during a bankruptcy.
Chapter 7 Bankruptcy
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