Bankruptcy is a legal proceeding brought by a person who is unable to pay his or her bills and is seeking relief in order to get a new beginning.  The right to file a bankruptcy is granted by federal law, and all bankruptcy matters are dealt with in federal court.  The simple filing of a bankruptcy proceeding immediately brings creditors to a halt and relieves you from all the harassment and grief brought about by debt collectors.

Many consumer debtors looking to file for bankruptcy, will file under either Chapter 7 "liquidation" or Chapter 13 "reorganization."  Either filing can be made by an individual or married couple.  A bankruptcy provides many types of relief during what may be the worst financial time of your life.  A bankruptcy may (1) eliminate the legal obligation to pay all or most of your unsecured debts; (2) stop a foreclosure sale on your home and give you the time and chance to catch up on payments you may owe on your mortgage; (3) prevent the repossession of your car; and (4) stop wage garnishment and collections.

Chapter 7 Bankruptcy is generally known as a "Straight Bankruptcy" or "Liquidation", and is by far the most rewarding in that once you enter into Chapter 7, all or most of your unsecured debt will be discharged. This means you will not have to pay any of these debts back. However, there are specific criteria that must be met in order to qualify for Chapter 7 Bankruptcy.  A significant advantage of Chapter 7 Bankruptcy is that the process is usually completed within three months, typically just one court appearance is necessary, and the debtor emerges without any future obligations on the discharged debts.

Often referred to as a "Repayment", Chapter 13 Bankruptcy is often used to catch up on past due mortgage or car loan payments while discharging your unsecured debt. Chapter 13 can also address debts that would not be dischargeable in a Chapter 7 proceeding.  In order to work, a Chapter 13 Plan requires that all or part of your debts be paid from future income over a period of time.  Generally, three to five years. Once this type of bankruptcy is approved, the matter is resolved, even if creditors were unwilling to work with you. As long as you make the required payments, you will not have to surrender property to a trustee.

Business Bankruptcy

Any formalized entity of business can file for Chapter 11 bankruptcy in accordance to United States Bankruptcy Code Title 11, Chapter 11 and under the terms of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Included in the entities able to reorganize and restructure under Chapter 11 bankruptcy include:

• Sole Proprietorships

• Partnerships

• Limited Liability Partnerships

• Limited Liability Corporations

• Corporations

• Co-operatives and Non-Profits

When utilizing a Chapter 11 restructuring, companies face the prospect of continuing business in light of current debt obligations. For executives and employees, the possibility of maintaining jobs, an income source, and retaining all assets used in producing this income are all retained. Furthermore, companies have been known to emerge from Chapter 11 bankruptcy and regain full control of their enterprise once again rather than full liquidating their assets. A bankruptcy court will supervise a company under Chapter 11 bankruptcy, manage the organizations debt, and contract obligations. Under the guidance of federal law, bankruptcy courts can discharge certain debts and contractual obligations in certain circumstances. In other instances, creditors will entirely take over a company in the event the organization's debts outweigh the current assets.Under the mediation of the bankruptcy courts, creditors and debtor companies meet to discuss plans for reorganization and restructure. Typically, a debtor company has a specific period to offer a plan of reorganization, which will include methods to satisfy existing debts, cuts in expenditures, and potential incomes. Creditors will then vote to agree or disagree on the plan, or if no plan is presented, creditors have the opportunity to present their own agenda. The court will decide whether each party is receiving treatment in the fair and equitable interest of resolving the matter at hand.