Douglass, West & Associates


Though it is a common enough word, what exactly does bankruptcy mean? And what are its implications? As is to be expected, filing for bankruptcy is a complicated process but before such a step is taken it is essential to understand exactly what it is all about.

Simply put, bankruptcy can be defined as the legal process through which individuals or businesses who end up in financial trouble are able to work out their debts and pay them out under the protection of the bankruptcy court. Often “liquidations” or “reorganizations” are the words that are used to sum up the process that unfolds when you file for bankruptcy.

Bankruptcy is a legal action in which a person (or business) who cannot pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided for by federal law and all bankruptcy cases are handled in federal court. Therefore, it is wise to have an attorney repre­sent you.

There are two kinds of bankruptcies for individuals:


In a straight bankruptcy under Chapter 7, a debtor files a petition asking the court to discharge his or her debts. The basic idea in a Chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for your giving up your property except for EXEMPT property which the law allows you to keep. In many cases, much or all of your property may be exempt. Property which is not exempt is sold and the money distributed to creditors. Read more about Chapter 7


In a Chapter 13 case, you, the debtor, file a PLAN showing how you will pay off some of your past-due and current debts over an extended period, normally three (3) years. This is different from Chapter 7 bankruptcy, where you ask the court to wipe out (discharge) your debts. Read more about Chapter 13