In general, there are several differences in filing Chapter 7 bankruptcy from Chapter 11(13).
Chapter 7 - this is referred to as a "liquidation" process because the debtor is no longer attempting to make payments or reorganize a business. Debtors are required to sell any assets which are not considered "exempt" (listed for each State and under the federal bankruptcy act of 2005), to pay off creditors.
*Exempt property commonly includes: your residence, your car, what's in your home, and retirement assets subject to the following: Bankruptcy Code 2005,522(d)(12), pension, profit sharing and stock bonus plans, employee annuities, IRA's, 401(k)'s and certain types of trusts. Make very sure to review your assets with a qualified attorney.
Priority of payment to creditors depends on the type of debt, documentation or contract under which it was incurred, and who is legally considered the debtor(s).
ADVANTAGES: After your assets or proceeds from liquidation have been distributed, any other debts or unpaid balances are DISCHARGED.
You may retain wages you are earning or property you acquire (with the exception of some state inheritance issues), AFTER the bankruptcy filing date.
Creditors may not legally contact or harass you (or your family in most cases) for repayment once you file.
Foreclosure on your mortgage can be halted while your finances get resolved. The 2005 federal law does require you go through a counseling program 180 days before filing the petition.
DISADVANTAGES: Bankruptcy will show up on any credit report for at least 10 years. A stigma is many times still attached to that when it is recorded.
Some types of debt are excluded and can't be written off, including mortgage liens. Co-signers many times do not receive the bankruptcy protection if they have not also filed.
You can only file a Chapter 7 proceeding once every 6 years.
Creditors may contest or object to what you list as exempt property involving litigation, delay and expense.