Each state has its own slight variations in the steps of filing bankruptcy. But in regards to terminology and process, bankruptcy throughout the nation is basically the same. The debtor owes money to a creditor or creditors, in both secured (home or auto) and unsecured (credit card) debt.
There are four chapters of bankruptcy. Chapter 7 is the most typical bankruptcy for individuals. It involves the liquidation of any non-exempt assets to be paid to the creditors. The remaining debt that is not paid by the liquidation is discharged.
Chapter 11 bankruptcies are preferred by businesses, because they can still conduct business operations during bankruptcy. It is more complicated than the chapter 7 and basically involves a reorganization of the debt owed. Assets are kept and the debtor has 120 days to submit a debt repayment plan.
Chapter 12 is a bankruptcy option that is exclusively for farmers. Similar to the Chapter 11, the farmer can keep his farm-owned equipment and other assets while he works out a plan for paying back the debt.
Lastly, Chapter 13 is also like Chapter 11, but is designed for individuals rather than businesses. The debtor can keep assets in bankruptcy. Some of the debt may be discharged, based on income, and the rest is set to be repaid over 3 to 5 years in a debt repayment plan.