Bankruptcy is a legal status of a person or other entity that cannot repay the debts it owes to creditors. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor.
There are six types of bankruptcy under the Bankruptcy Code, located at Title 11 of the United States Code.
Basic liquidation for individuals and businesses; also known as straight bankruptcy; it is the simplest and quickest form of bankruptcy available.
Municipal bankruptcy; a federal mechanism for the resolution of municipal debts.
Rehabilitation or reorganisation, used primarily by business debtors, but sometimes by individuals with substantial debts and assets; known as corporate bankruptcy, it is a form of corporate financial reorganisation which typically allows companies to continue to function while they follow debt repayment plans.
Rehabilitation for family farmers and fishermen.
Rehabilitation with a payment plan for individuals with a regular source of income; enables individuals with regular income to develop a plan to repay all or part of their debts; also known as Wage Earner Bankruptcy.
Ancillary and other international cases; provides a mechanism for dealing with bankruptcy debtors and helps foreign debtors to clear debts.