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Some Chapters are more suitable for varying needs, but bankruptcy, in short, gives relief for debtors by the automatic stay on creditors’ actions after the filing. The automatic stay ensures that all forms of harassment that debtors may have experienced, including letters, phone calls and other demands for funds, must stop. Ultimately, if all of the requirements of the court are reached in the genuine and open manner indicative of complete disclosure, various types of discharge are available which allows the debtor to take up their lives or businesses once more.

Individuals weighted down by consumer debt, such as credit card debt, can anticipate to have this debt knocked out as most credit card debt is unsecured. Debtors filing under chapter 7 have to make their non-exempt assets available for liquidation to secured creditors. The debtor has to provide for payment or surrender the collateral. Unsecured creditors will not receive complete payment or, indeed, any payment. The bankruptcy court appoints a trustee who sets up a meeting with creditors and deals with the disposal of assets to creditors according to their status. By the end of the process the debtor in most cases receives a discharge; which means that the debtor is relieaved from the cumbersome debt and able to start life afresh without further harassment from creditors.

While chapter 7 is a legal option predicated on whiping out debt, there is also a provision for reaffirmation of a specific debt assuming the debtor can prove sufficient income. In this case the debtor makes arrangements with a creditor to hold on to certain property. Chapter 7 does not mean the loss of all assets, so home assets and exempt property can in most cases be retained.

Various other approaches to bankruptcy look into reorganization instead of liquidation. These approaches call for the development by way of a repayment plan so that the debtor can keep property or a business following the reorganization, and under some cases consolidation, of debt. The reorganization approach is chapter 13, and its ideal for individuals who have a regular income sufficient enough to keep their property and manage their mortgages given support and guidance.

Again the debtor receives relief on filing on account of the hold on creditor actions, and co-debtors will also be protected from creditors. A repayment plan is produced during debt counseling, although unsecured creditors may receive little or no repayments depending on the debtor’s situation. After three to five years, the debtor is likely to obtain a discharge of debts.

Chapter 12 offers family farmers and fishermen a comparable approach to debt management but one which encompasses greater debt burdens including those related to operating these businesses.

Filing chapter 11 is a bankruptcy option that provides businesses with the an opportunity to remain in control and operate the business, ultimately, eliminating the debt burden. This option is the best option for larger businesses as it is a complex, lengthy and potentially expensive business. Although it gives the business the tools they need to succeed. It provides for flexiblity in changing business environments where repayment plans can be modified.

Whether an individual or a business, discharge generally means that the debtor is free from debts in existence prior to filing the petition.

Tags: bankruptcy, chapter 11, chapter 7, law