There are three main classes of bankruptcy: Chapter 7, Chapter 11, and Chapter 13.

Chapter 7 bankruptcy will discharge most types of debts for the average citizen.  It will stay on record for ten years, but the major benefit is the stay it provides which prevents creditors from hassling you. 

To determine whether or not you are eligible, you must determine how many people make an income in your household and whether or not they each pass the means test—that is, whether or not they make over the median income.

Chapter 11 bankruptcy is used by businesses, not citizens, to reorganize debts. 

The main advantage of this type of bankruptcy is that it allows the debtor to keep possession of the company.  However, the strict requirements of the bankrupty process must be followed!  Motions regarding such issues as employee payment and cash collateral should be made by the bankrupty courts. 

The debtor has 120 days in which to propose a plan or reorganization to the bankruptcy court.  Because this kind of bankruptcy is so complicated, a bankruptcy attorney should be consulted first.

Chapter 13 bankruptcy is “wage earner’s bankruptcy”, which allows you to repay your debt through a plan. 

This is the best option for people with a steady income, who happen to have fallen behind in loan payments. 

The major advantage of this kind of bankruptcy is that the creditors must agree to a confirmed plan.  This prevents lawsuits designed to order the debtor to pay the balance already owed.   Lawsuits result in frustration for all concerned, as the debtor can mistakenly think that things are going great for the first six months, only to be surprised one day out of the blue. 

Bankruptcy is a complex issue that must be studied in detail to be fully understood.  Attorneys specializing in bankruptcy are clearly the best choice, as they specialize in the specific areas of Chapter 7, Chapter 11, and Chapter 13 bankruptcy.