Bankruptcy is a legal process designed to help individuals or businesses that can no longer meet their financial obligations. It allows them to eliminate or repay some or all of their debts under the protection of the federal bankruptcy court. Depending on the circumstances and the type of bankruptcy filed, the process can provide a fresh financial start while offering some immediate benefits, such as a halt on debt collection efforts.

In the United States, bankruptcies are typically classified under different “chapters” of the U.S. Bankruptcy Code. The most common are Chapter 7, Chapter 11, and Chapter 13.

Chapter 7

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” is designed for individuals with limited income who cannot pay back their debts. In this process, a bankruptcy trustee is appointed to sell the debtor’s non-exempt assets to repay creditors. After the liquidation and repayment, most of the debtor’s remaining debts are discharged, meaning the debtor is no longer legally required to pay them.

Chapter 11

Chapter 11 bankruptcy, typically used by businesses, allows them to continue operating while restructuring their debts. This process involves the debtor creating a plan to reduce expenses, increase income, and pay back the debts over time while maintaining business operations. The goal is to allow the business to ‘reorganize’ and become profitable again, with creditors often agreeing to lower repayments or forgive a portion of the debt.

Chapter 13

Chapter 13 bankruptcy, or “wage earner’s bankruptcy,” is meant for individuals who have regular income and can pay back a portion of their debts through a repayment plan. The debtor proposes a plan to repay their debts over a period of three to five years, allowing them to keep their assets such as a home or car which they might otherwise lose in a Chapter 7 bankruptcy.


The process of filing for bankruptcy generally involves credit counseling, filing a petition and several other forms at the bankruptcy court, paying a filing fee, and attending meetings and hearings. The specific steps can vary based on the type of bankruptcy filed.

It’s important to note that while bankruptcy can provide relief, it also comes with serious consequences. Bankruptcy filings stay on a person’s credit report for seven to ten years, making it harder to get credit, buy a home, or even find a job. It can also have emotional impacts and does not discharge all types of debt, such as student loans, child support, and most tax debts.

Legal Help

Seeking the advice of a competent bankruptcy bankruptcy lawyer is crucial, as bankruptcy law can be complicated, and making a mistake can have long-term financial consequences. Attorneys can provide guidance on the type of bankruptcy to file, help complete necessary paperwork, represent the debtor in court, and navigate through the process.
Bankruptcy is a legal proceeding designed to help individuals and businesses overcome insurmountable debt. Despite its drawbacks, it can provide a much-needed fresh start for those drowning in debt, emphasizing the importance of careful consideration, planning, and legal counsel when considering this significant financial decision. Reach out to a firm like Therman Law Offices, LTD for assistance.