Bankruptcy is a legal way to manage overwhelming debt, whether for individuals, corporations, or even local governments

The most common types of bankruptcy filings are Chapter 7, Chapter 11, and Chapter 13

However, there are actually six types in practice today. These less-common options can be lifelines for foreign businesses operating in the US, local governments, and farms and fisheries.

What is Chapter 11 bankruptcy?

While there are multiple types of bankruptcies, Chapter 11 is probably the one you've heard about the most. Technically speaking, Chapter 11 bankruptcy involves a reorganization of a business's assets and debts under court supervision. Companies such as Red Lobster, WeWork, and Party City have all filed for Chapter 11 bankruptcy in recent years. Learn more about it here.

For some debtors without assets that can be sold or returned, filing for bankruptcy can provide a path toward a clean slate

However, the bankruptcy process does not apply to several types of common debt, including money owed toward child support or alimony payments. Most debtors also do not qualify for relief from student loan payments.

Every year, nearly 500,000 bankruptcies are filed in the US

From personal hardships to major corporate collapses like Enron and Bed Bath & Beyond, filing for bankruptcy isn't a quick fix or a “get-out-of-jail-free” card—it’s a complex, structured process offering debt relief or repayment options.

Filing for Chapter 7 bankruptcy can be complex

Debtors must know whether their liabilities are secured or unsecured and what type of assets they have. They also need to know what a filing can and can’t help them with.

Some people make too much money to file for Chapter 7 bankruptcy

Chapter 7 is the most popular type of filing for individuals needing relief. However, to be eligible, debtors must pass an income means test. At the most basic level, they must prove that their average monthly income over six months is below their state’s median. But there are exceptions.

Brush up on your bankruptcy vocab

The technical term for what happens when a court removes a debtor’s obligation to repay money owed is “discharge.” An “automatic stay” is what goes into place once a filing occurs to prevent a debtor from facing lawsuits, evictions, and other negative consequences until the process wraps up.

Congress has the power to enact laws related to bankruptcy, thanks to the US Constitution

It has done just that since 1800. This legislation, which outlines the various types of bankruptcy filings, has evolved over time. The most recent iteration is the Bankruptcy Reform Act of 1978, which introduced Chapter 11 filings in an effort to make the process easier for businesses and individuals.

Calculate: Do you need to file for bankruptcy?

About 77% of American households had some debt at the end of 2023. However, when debt becomes crushing, it's time to consider a management plan or a bankruptcy filing. This calculator helps explore whether debt is manageable based on inputs like medical debt, payday loans, and gross annual income.

Credit scores seriously suffer when individuals file for bankruptcy, and there’s no easy fix

Those who file for Chapter 7 must wait 10 years before the bankruptcy is removed from their credit report. For Chapter 13, the wait time is seven years.

Chapter 7 and Chapter 11 filings can impact common stockholders

Publicly traded companies don’t file for bankruptcy out of nowhere—there are typically warning signs in a stock’s performance, quarterly earnings calls, and US Securities and Exchange Commission filings.

Take a bankruptcy self-filing quiz

If a debtor is considering filing for Chapter 7 bankruptcy, it may be tempting to take a do-it-yourself approach to avoid attorney or preparer fees. However, experts caution that this could come back to bite filers. A quiz can help would-be filers explore whether their cases are complex enough to necessitate a lawyer.

Investment banking giant Lehman Brothers filed for bankruptcy in September 2008 when it had $619B in debt, making it the largest bankruptcy ever in the US

Nearly all of its 26,000 employees immediately lost their jobs. But in London, a few hundred remained tucked away, working for another decade to wind down the bank’s European business.

There’s an artificial intelligence model trained on bankruptcy law

Although it's designed for lawyers, the tool is able to help everyday browsers synthesize important cases and point users to relevant documents about them. One sample using it asks Chatlaw to explain the significance of a recent case and then to define relevant terminology.

Tom Petty used bankruptcy to change the music industry

In order to resolve a dispute over how a label was treating him as an artist, he self-produced an album and racked up $500K in debt. The resulting bankruptcy filing allowed him to start a new contract with the label on more favorable terms.

Bank runs, explained

A major feature of the modern financial system is trust: if an institution loses it, customers will quickly withdraw deposits and stockholders will sell their shares. This digestible animated video looks into the nature and history of bank runs and...

Local governments borrow money for long-term projects by issuing municipal bonds

When a city needs to build a school, a road, or a water treatment plant, it usually issues a municipal bond—borrowing money from investors to be paid back over time. The market for these bonds now exceeds $4T.

Four popular budgeting strategies

While budgeting is an individualized process, there are a few tried-and-true budgeting methods people interested in saving money or paying down debt tend to use. These methods include the envelope method—where people budget for things like rent, savings, and food by putting cash in various physical envelopes—the 50/20/30 method, and others. Read about four popular budgeting strategies in this article.

US consumers collectively owe more than $1T to credit card companies—almost as much as they owe in auto loans.

When the US hits the debt ceiling, the Treasury uses emergency measures to avoid default

After the US reached its debt ceiling in January 2023, the Treasury deployed "extraordinary measures" to keep paying obligations. This article explains the steps, how they work, and why they last only for a limited time. (Some readers may experience a paywall.)

Both individuals and businesses can establish trusts

Business trusts can allow trustees to manage a beneficiary’s stake in a business, and more. There are many different specific types of business trusts.

Probate is a legal process that determines if someone’s will is valid

The executor of the will in question not only collects estate assets, but also pays outstanding taxes and more. Grantors sometimes opt for a revocable trust instead of a will so their assets avoid probate in the event of their death.

Ledgers—what are they good for?

It might seem strange that a ledger—a dull and practical document associated mainly with accounting—would be described as a revolutionary technology. But the blockchain matters because ledgers matter. Read (or listen to) this 14 minute breakdown on why ledgers matter.

Consolidated city-county governments merge two layers of local government into one

A city-county consolidation removes a layer of local government by merging a municipality with its surrounding county. Examples include Jacksonville-Duval County, Louisville-Jefferson County, and San Francisco, all of which operate as both cities and counties.

Private equity firms often use leveraged buyouts to acquire new companies

In a leveraged buyout or "LBO," private equity funds finance acquisitions with debt secured by the target company's assets and cash flows. The PE firm aims to improve operations and leverage the company's profile to pay down debt, thereby increasing equity value.

Cat food, death, and heavy machinery: Learn about loopholes in the American tax code

Tax avoidance isn't the same as tax evasion. The tax code is full of legal loopholes accountants can use to lighten their clients' tax burden. For instance, large estates can be counted as farms and some cars count as heavy machinery.

The first steps to rebuilding your credit score include getting to know exactly what's on your credit report and figuring out how far you are from the '700 club,' or 'good score' range.

Play the role of a student in a game where you try to navigate college and remain debt-free, selecting different income levels, high school experience, race, ethnicity, and more.

An initial public offering or 'IPO' is the process of a private company becoming public by putting shares of the company on the stock market for purchase.

The United States is one of only around two dozen countries with a fully federal system of government, in which power is divided between national and state governments.

Gerrymandering works through two techniques: cracking opposing voters across districts to dilute their power, and packing them into a few to waste their votes in lopsided majorities.

Hedge funds, the private investment firms that trade a wide swath of financial assets, make money by imposing steep fees on investors and from the fund's investment performance.

Watch this video that uses Lego bricks to explain how venture capital works.

The idea for the Federal Reserve was conceived in secret in 1910—with bankers donning duck hunt gear for disguise while traveling to a remote country club on Georgia's Jekyll Island

The use of fungi to detoxify land and water—a process known as mycoremediation—has been used to clean up natural resources affected by the 2025 California wildfires.

Art theft is the third-largest source of criminal revenues worldwide, thanks in part to the subjective nature of valuing a work of art.

SpongeBob exemplifies Aristotle's philosophy for living well because he understands that happiness doesn't come from external factors like money, recognition, or power.

After the Boston Tea Party, colonists switched to coffee, which became the main morning drink for revolutionaries.

Chaos theory—informally known as the butterfly effect—is the reason why weather forecasts are presented with probabilities rather than certainties.

Louisiana's 'Cancer Alley' is infamous for having some of the highest industrial pollution, toxic air emissions, and cancer risks in the US.

To reduce wrinkles in clothing, research recommends gentle wash cycles with more water and tumble drying with smaller loads and longer times.

Watch the cumbersome, but necessary, precautions healthcare workers must take to care for and protect themselves while caring for Ebola patients.

Bone marrow (soft tissue found inside certain bones) generates roughly 500 billion new blood cells each day

Power lines are dotted with large, brightly colored balls to improve the visibility of these thin wires to helicopters and small planes and help prevent potential crashes.

Sony set the standard for cylinder-shaped batteries when it repurposed manufacturing equipment used to make rolls of magnetic recording tape.

The Brothers Grimm were lawyers before they were storytellers, and became interested in fairy tales as they began investigating how rules and customs had been passed down through cultures.

Corals are themselves not coral reefs—the term refers to the tiny marine invertebrates that build the rigid reef.

Pure water does not conduct electricity because this flow of energy requires the movement of charged particles, and water is a neutral molecule.

Most of the observable universe's volume consists of voids and supervoids—enormous regions of space with little to no galaxies, stars, or light.

A century of Billboard issues documenting the evolution of popular music.