Bankruptcy for the individual or the married or domestic partner couple comes in three forms, called "Chapters." Chapter 7 bankruptcy is the most common form filed by spouses or individuals. Chapter 12 bankruptcy is restricted to people who are family farmers or fisherman. Individuals or married couples may also file Chapter 13 bankruptcy, but this is rare.

For businesses, the two common forms of bankruptcy utilized are Chapter 7 and Chapter 11. Less commonly, an individual or business might file under Chapter 15 bankruptcy, which involves the clearing of international debts. If an agency of the state, such as a city, must declare bankruptcy, they file Chapter 9 which is also called municipal bankruptcy.

Chapter 7 bankruptcy tends to be used by either individuals or businesses that want a total clean slate. A business that files Chapter 7 bankruptcy tends to close their business as a result. For the individual, Chapter 7 bankruptcy means that the courts declare one unable to pay debts incurred, and almost all debts are then void. Certain federal debts, like student loans, are unaffected by declaring bankruptcy.

One must generally be able to prove that one’s income is insufficient to meet debts. A person filing Chapter 7 risks losing the most assets with this type of bankruptcy. One will not lose a primary vehicle or residence under this form of bankruptcy, unless the person has an auto loan and cannot make payments on the vehicle, or a home loan, which he or she cannot pay for.

All assets must be declared when filing Chapter 7. Other assets like second houses, collectibles, and additional vehicles are liquidated to pay debts. Most who file Chapter 7 bankruptcy do so because they have very little left to lose. Once a judge approves the bankruptcy filing, virtually all debts, like those owed to credit card companies and doctors or hospitals are cleared and the person is given a clean slate.

Chapter 13 bankruptcy is filed by individuals who do own a great deal of property or assets, but find that their income cannot cover the exorbitant payments on debts owed. In this form, the debt is restructured, and in some cases reduced so that people retain their assets but have reasonable payments which they can make to debtors. Generally the court-ordered payments must be made on time and regularly in order to avoid having assets seized.