The bankruptcy code is divided into chapters. The chapters that usually apply to consumers are chapter 7, where most or all of your debt is wiped out, and chapter 13, which involves a repayment plan. In most cases, once one files a case, the “automatic stay” immediately goes into effect.
The automatic stay means that a bankruptcy filing automatically stops, or stays, and brings to a halt most lawsuits, repossessions, foreclosures, evictions, garnishments, attachments, utility shut-offs, and debt collection harassment. Generally, creditors cannot take any further action against you or your property without permission from the bankruptcy court. Some debts do not go away in bankruptcy. Examples of non-dischargeable debt are: student loans, taxes and domestic support obligations.
Chapter 7: Chapter 7 is designed for people who are having financial difficulties and are not able to re-pay their debts.
Chapter 13: Chapter 13 is a valuable tool that lets one catch up overdue mortgage or car payments, taxes and domestic support obligations. It also applies where one has the ability to repay some or all of their debts overtime.
Chapter 11: Chapter 11 is designed primarily for business reorganization, but is also available to consumer debtors. Its provisions are quite complex. In the vast majority of cases, chapter 11 is unnecessary and too expensive for most consumer debtors.
Chapter 12: Chapter 12 is intended for the farmer or fisherman.
Credit counseling: Reputable credit counselors can advise one on managing money and debts. They may also be able to develop a plan to repay one’s debts. Unfortunately, many credit counselors are not reputable and charge high fees and contributions that will cause you to fall deeper into debt and damage your credit rating.
You are required to take two short credit counseling courses, one before you file bankruptcy, and one after you have filed.