There’s little that’s more confusing for people in dire financial straits than trying to figure out the difference between Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy, so we’re pleased to share this extensive explanation here. It’s well worth reading, even if your finances are in pretty good shape today…

Chapter 7 Bankruptcy

The potential chapter 7 debtor should understand that a straight bankruptcy case does not involve the filing of a plan of repayment as in chapter 13, but rather envisions the bankruptcy trustee’s gathering and sale of the debtor’s nonexempt assets, from which holders of claims (creditors) will receive distributions in accordance with the provisions of the Bankruptcy Code. Part of the debtor’s property may be subject to liens and mortgages that pledge the property to other creditors. In addition, under chapter 7, the individual debtor is permitted to retain certain “exempt” property. The debtor’s remaining assets are liquidated by a trustee. Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of…