Filing for bankruptcy may be the best recourse for individuals and businesses encumbered with unmanageable debt. There are two procedures available to debtors under the provisions of U.S. bankruptcy codes. They are Chapter 7 and Chapter 13. The purpose of both court proceedings is to provide the debtor with immediate and long-term relief from their debts.

The provisions under Chapter 7 provide for the liquidation of debts, while Chapter 13 is designed to provide the debtor the opportunity to restructure their debts and create a court-approved payment plan. Filing for bankruptcy requires following a specific process and meeting certain requirements.

Individuals who file under Chapter 7 may be allowed to keep certain assets. The type and value of these assets varies from state to state. The remainder of any property will be sold to repay creditors. Alimony and student loans are obligations that cannot be discharged through bankruptcy. The remaining debts will be forgiven. You must undergo a means test to file for bankruptcy. This was implemented to prevent abuse of the system. Once the process is complete, the bankruptcy will remain on your credit history for as long as 10 years. This may impact your future ability to obtain credit.

If you are considering filing for bankruptcy, you should consult an attorney who has experience helping those who need a fresh start.