• The legal tradition of bankruptcy dates all the way back to the Old Testament, which mandated the Jubilee every 49 years, requiring the freedom of indentured servants. The concept continued in English common law, with the first English bankruptcy laws enacted in 1542. In its current form, bankruptcy law allows for the orderly and just liquidation of a debtor's assets to repay debts and also allows for a "fresh start," after certain debts are forgiven.
  
  

Chapter 7

• Chapter 7 bankruptcy refers to Chapter 7 of the United States Bankruptcy code. Chapter 7 involves the near total liquidation of personal and business debts to satisfy the claims of creditors. Businesses that file under Chapter 7 are typically out of business after that point. All property is surrendered to the bankruptcy trustee for redistribution to creditors with the exception of certain exempted property, such as a limited amount of home equity, personal property and a car. Certain debts, such as child support, may not be discharged in bankruptcy. You may only declare Chapter 7 bankruptcy once in an eight-year period, and you cannot obtain a discharge under Chapter 7 if you have filed under Chapter 13 in the last six years.
  
  

Chapter 11

• Chapter 11 bankruptcy provides for a reorganization for small businesses which cannot pay debts on schedule. Under Chapter 11, the business can continue to operate as a going concern and does not need to totally liquidate. Chapter 11 filers repay debts according to a court-approved debt repayment plan.
  
  

Chapter 12

• Chapter 12 bankruptcy is a special chapter in the bankruptcy code designed for family farmers and fishermen. The law takes special account of the specific seasonal nature of these businesses and the necessity of large amounts of debt in the operation of many farms, which typically borrow money in the spring to plant, repaying it in the fall, after the harvest. It provides for a higher overall debt ceiling than Chapter 13 and provides exemption limits that help farmers and fishermen keep their land and boats and help them stay in operation.
  
  

Chapter 13

• Chapter 13 outlines the procedures for a personal reorganization and repayment of debts under a court-supervised repayment plan. It frequently has the advantage of being able to stop a foreclosure, which would typically go forward under Chapter 7. It is typically suitable for individuals with reliable incomes who expect to be able to follow through on a debt repayment plan. You cannot obtain a discharge under chapter 13 if you have obtained a discharge under Chapter 7 in the last four years, or under Chapter 13 in the last two years.