What Are the Different Types of Bankruptcy?

Editor’s Note: This post was originally published in September 2023.

Key Takeaways

• Most individuals who file bankruptcy choose Chapter 7 or Chapter 13.
• Bankruptcy isn’t guaranteed to eliminate all of your debt.
• Some types of bankruptcy involve going on a three- to five-year repayment plan. 
• It’s always a good idea to seek legal counsel if you’re considering bankruptcy.
• An NFCC-certified credit counselor can help you understand your best options for managing debt.

Most people in the United States are familiar with the term bankruptcy, but aren’t really sure how bankruptcy works. For example, you may not be clear on who can file, how much bankruptcy hurts your credit scores or what the alternatives are.

One reason for the confusion is that there are several types of bankruptcy, and each one can affect your credit and finances differently. For example, Chapter 7 bankruptcy may eliminate some of your debt in a matter of months, while Chapter 13 can put you on a three- to five-year debt repayment plan. 

Here’s what you need to know about the different types of bankruptcy before you consider filing.

Chapter 7

Who it’s for: Individuals and businesses

Cost to file: $338

Chapter 7 bankruptcy, sometimes referred to as liquidation, is the most common type of bankruptcy in the U.S. According to the United States Courts, 356,724 cases were filed in 2025. 

Under Chapter 7, you may be able to have your “unsecured” debt (accounts that don’t have collateral) discharged, or eliminated. Some of your assets can also be sold or cashed out by a bankruptcy trustee in order to pay your creditors. You may be allowed to keep “exempt property” that has minimal value, or keep property you still owe money on, if you’re willing and able to maintain the loan payments.

Chapter 9

Who it’s for: Municipalities

Cost to file: $1,738

Chapter 9 bankruptcy is designed for municipalities. That includes cities, towns, counties and school districts. Municipalities that file Chapter 9 can get protection from creditors and reorganize their debt in order to regain financial stability. About 30 U.S. municipalities have filed for Chapter 9 bankruptcy, including the city of Detroit, Mich. in 2013, Fairfield, Ala. in 2020 and Chester, Pa. in 2022.

Chapter 11

Who it’s for: Individuals and businesses

Cost to file: $1,738

Chapter 11 bankruptcy, also known as “reorganization” bankruptcy, is usually filed by businesses that need help. Filing Chapter 11 allows the debtor to remain in control of their business operations, and the business’s assets don’t have to be sold. Instead, the business will attempt to change the terms of its debt, potentially reducing interest rates and payment amounts. Major businesses that have filed Chapter 11 include Converse, Six Flags and American Airlines.

Chapter 12

Who it’s for: Family farmers and fishers

Cost to file: $278

This form of bankruptcy is designed for family farmers and family fishers who are in financial distress but are still earning regular annual income. Chapter 12 allows the farmer or fisher to maintain ownership of their business. Similar to Chapter 13, Chapter 12 puts the debtor on a plan to pay back creditors over a period of three to five years. 

Chapter 13

Who it’s for: Individuals

Cost to file: $313

One of the main benefits of filing Chapter 13 bankruptcy is that it can stop foreclosure proceedings on your home. Under Chapter 13, also known as a “wage earner’s plan,” an individual who has regular income can enter a new, court-ordered debt payment plan for three to five years, based on what they can afford. At the end of the plan, you may be able to have some of your remaining debt discharged.

Chapter 15

Who it’s for: Individuals and businesses with debt in multiple countries

Cost to file: $1,738

In 2005, Chapter 15 bankruptcy was added to the U.S. Bankruptcy Code. Chapter 15 bankruptcy provides a way to deal with debt you owe in more than one country, and it’s meant to support cooperation between foreign courts and authorities and U.S. bankruptcy courts.

Should you file for bankruptcy?

For some people, filing for bankruptcy seems like the only way to get out from under a mountain of debt. But filing has long-lasting consequences, so it’s not a decision to be taken lightly. Make sure to consider these pros and cons, and consult with a legal professional, before deciding to file:

Pros of filing bankruptcy

• Get help managing or eliminating debt you can’t afford.
• It can stop most debt collection calls and letters.
• Press “pause” on foreclosure and repossession proceedings.
• The damage to your credit is not permanent.

Cons of filing bankruptcy

• Legal fees and court filing fees may not be affordable.
• Your credit reports will show bankruptcy for 7-10 years. 
• Filing can cause a significant drop in your credit scores.
• It can be difficult to qualify for loans and credit cards for several years after you file.
• You may be forced to close some or all of your credit cards.
• Some debt can’t be discharged, including most taxes and federal student loans.

Can credit counseling help you avoid bankruptcy?

If you’re looking for a way to manage debt, bankruptcy is just one option. You can get professional help navigating all of your options by reaching out to one of the NFCC’s certified, nonprofit credit counseling agencies. A counselor can walk you through all of the strategies for dealing with your debt, which may include bankruptcy, but could also include going on a debt management plan or even working with your creditors directly.counselor. A counselor can walk you through all of your options, which may include bankruptcy, going on a debt management plan or working with your creditors directly.