A federal judicial procedure by which most debts owed by a person or entity are extinguished or reduced or the payment of which are delayed. Chapter 7 bankruptcy. A bankruptcy proceeding whereby most of the debtor's assets are collected and sold, the proceeds are distributed among the creditors, and the debtor's liabilities are discharged. Also called a straight bankruptcy. Chapter 11 bankruptcy. A bankruptcy proceeding whereby a debtor, usually a business, is allowed to reorganize itself and...