In most cases, your ultimate goal is a “discharge” which allows you to make a “fresh start” by obtaining relief from overwhelming debt. The bankruptcy discharge is basically a court order which releases you from personal liability on certain debts.
Individuals and businesses may file for bankruptcy.
Bankruptcy is a federal court proceeding. The process is overseen by a Bankruptcy Trustee and the Bankruptcy Court Judge. Your involvement with the bankruptcy judge is very limited. In chapter 7, you will not see the bankruptcy judge unless an objection is raised in the case. In chapter 13, you will usually appear before the bankruptcy judge only once at a plan confirmation hearing.
The only formal proceeding at which you must always appear is the “meeting of creditors” which is administered by the bankruptcy trustee. You must attend this meeting so that the trustee (and sometimes creditors) can ask you about your assets and debts.
There are two basic types of bankruptcy designed for individuals:
- Chapter 7 Bankruptcy which is also known as “liquidation” and
- Chapter 13 Bankruptcy which is also known as “reorganization” or “wage earner”.