Bankruptcy can be a process that is quite complicated, which is partially due to all the different forms of bankruptcy. There is not a one-size-fits-all approach to bankruptcy, since you need to pick the kind that works best for your financial situation. Here are the basics of bankruptcy so you can make a more informed decision about your choice. 

Chapter 7

The most extreme form of bankruptcy is Chapter 7. It is used when someone needs a financial fresh start due to being very deep in debt that they cannot get out of. You can expect to be required to liquidate the assets that you own to help pay debts that you owe, with remaining debts that cannot be paid being discharged. Not only do you not have to worry about ever paying back these debts, but the creditors will be ordered to stop contacting you about them. However, Chapter 7 has the longest impact on your credit history, making it difficult to borrow money in the future.

Chapter 7 bankruptcy does require means testing to determine if you are eligible. Your income will be compared to your state's median income, and if it is too high, you won't qualify for Chapter 7. You'll have to look into other options that involve paying back a portion of your debt.

Chapter 11

The main thing to know about Chapter 11 is that it is a form of bankruptcy often used by businesses and individuals in partnerships. Chapter 11 can be used to restructure debts, such as payroll taxes or property taxes, so that you can keep the business running and still work on paying off those debts. One problem with using Chapter 11 is that it won't protect personal assets for those people that own a sole proprietorship. Paying back those debts may extend to forcing the liquidation of personal assets.

Chapter 13

Chapter 13 is a more forgiving form a bankruptcy, since it's used by individuals that are having problems paying some debts back. Debts under Chapter 11 are restructured so that they can be paid back over time with favorable terms that help you make those payments. Since debts are being repaid, you will need to have disposable income in the future to help go towards paying off the debts. You can also expect a smaller impact on your credit report as a result.

Work with a bankruptcy law firm for assistance with navigating your bankruptcy.