The most common types of bankruptcy for individual consumers are Chapter 7 and Chapter 13.
Chapter 7: Chapter 7 is the "operative" chapter of the Bankruptcy Code that normally governs liquidation of a debtor. Liquidation involves the collection, liquidation and distribution of the nonexempt property of the debtor and culminates, if the debtor is an individual, in the discharge of the debtor. Chapter 7 allows for the discharge of unsecured debts including credit cards, medical bills and personal loans. In the average case, a person is usually able to exempt all their personal property to avoid a sale. The Chapter 7 process can be completed in as little as 90 days, allowing you to begin rebuilding your financial standing.
Chapter 13: Chapter 13 of the Bankruptcy Code is titled "Adjustment of Debts of an Individual with Regular Income." Chapter 13 permits a debtor to deal comprehensively with both unsecured and secured debts. This is accomplished through the chapter 13 plan, which only the debtor may propose. The plan sets out, within statutory parameters for plan confirmation, how the debtor desires to make payments to various creditors.
A chapter 13 plan can provide for the payment of secured claims to permit the debtor to retain collateral for those claims and may provide for the cure of arrearages on long-term debts, such as home mortgages. The debtor may retain nonexempt property if the plan provides that unsecured creditors will receive the property's present value in the form of plan payments.
If the debtor completes the chapter 13 plan, the debtor receives a discharge on all remaining eligible debt.
The bankruptcy codes also provides for bankruptcy under Chapter 11, 12, 9, and 15.