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Like most people, I never thought I would need to declare bankruptcy, so I never learned much about the different types of bankruptcy. It was a subject that seemed irrelevant to me until my debt started to pile up and overwhelm what I was able to pay. Suddenly, I needed to get educated in a hurry.

The bankruptcy I’m talking about here is for individuals. Businesses can also file for bankruptcy but they do so under a different section of the US Code than individuals. For a normal person like you or me, there are two main types of bankruptcy: Chapter 7 or Chapter 13. These names simply refer to the chapter of the bankruptcy code where each procedure is found.

In general, Chapter 7 is for people who cannot make any debt payments at all and Chapter 13 is for people who still have an income and could make some payments toward their debt. It might sound like making payments even after declaring bankruptcy is a bad deal, but if it is possible for you you should really consider filing Chapter 13. You will make a plan for affordable payments for only 3 to 5 years. When you go this route you get to keep most, or all, of your personal property including a house! If you have to file Chapter 7, most of your property will be liquidated and sold off whether you like it or now.

This is only the most basic introduction to the two major options you have. As always in matters of law and finance, consult a lawyer on how best to proceed.