The main purpose of bankruptcy is to give the honest person, who is hopelessly burdened with debt, a fresh start by wiping out their debts. There are different types of bankruptcy.  However, despite the several possibilities, most consumers work with their attorneys to choose between only two choices – Chapter 7 and Chapter 13. 

Chapter 7 Bankruptcy is also called “straight bankruptcy”.  The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose so Chapter 7 will give that person a relatively quick "fresh start" without paying back the debt.

Chapter 13 Bankruptcy is also called "reorganization". Chapter13 bankruptcy is filed by individuals who have the ability to pay some or all debts over a period of three to five years.  However, generally only a very small percentage of the debt must be paid. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also an option for individuals who have sufficient income to pay reasonable living expenses with some amount left over to pay a portion of their debt.