Up 43. What is chapter 7, 11, 12, and 13?
Chapter 7 is the most frequently used chapter because it involves the complete liquidation of a debtor’s property, with the proceeds used to pay off the debts. However, the debtor can retain certain exempt property under Federal law and/or State law, such as tools of one’s trade, limited equity in a car and house, and some personal effects. If you use Chapter 7 you may lose your home (depending on your state) but it does enable you to get out from under the burden of debt more quickly. Chapter 11 is typically used for business bankruptcies and restructuring. It is not commonly used by individual consumers since it is far more complex and expensive to pursue. It allows businesses to reorganize themselves, giving them an opportunity to restructure debt and get out from under certain burdensome leases and contracts. Typically a business is allowed to continue to operate while it is in Chapter 11, although it does so under the supervision of the Bankruptcy Court and its appointees. Chapter
