7 "liquidation bankruptcy": The Debtor (person owing money) submits a VOLUNTARY PETITION, with the appropriate schedules and forms to show all of the Debtor's assets and all debts. An interim Trustee is then appointed to determine if the Debtor has any assets which can be taken or sold to satisfy the pool of unsecured creditors. If no assets are available (as in most of the cases filed under this chapter) and the Debtor has not committed a "bad act" then most debts are forgiven (with a few exceptions – i.e., most tax debt, most student loan debt, etc.) Liens on assets (such as mortgages on houses and auto loans) must be paid if the property is to be kept. A "Bad Act" is defined as attempting to hide or dispose of property prior to filing bankruptcy or submitting fraudulent information to the Bankruptcy Court.
13 "wage earner": The Debtor submits a VOLUNTARY PETITION, with the appropriate schedules and forms to show all of the Debtor's assets and debts. An interim Trustee is then appointed to oversee the restructuring of debts and the approval of the debtor's plan. Creditors are paid back in whole or in part as determined by the debtor's repayment plan which must ultimately be approved the Bankruptcy Court.