The origin of the word bankruptcy can be traced back to Italy during the Medieval Period. In those days, when a businessman was unable to pay his debts, the practice at that time was to destroy his trading bench. From the term "broken bench" or "banca rotta" comes the word "bankruptcy". One of the main purposes of Bankruptcy Law is to give a person, who is hopelessly burdened with debt, a fresh start by wiping out his or her debts. In its most basic form, bankruptcy law is a consumer protection law. It is a federal process which allows consumers to have their qualifying debts forgiven.


The law recognizes that bad things sometimes happen to good people, and consumers sometimes simply do not have the ability to comply with creditor's repayment demands. Bankruptcy law are based on forgiveness rather than punishment. Bankruptcy does not seek to deter or regulate certain behavior as other laws do; it simply recognizes that there are sometimes circumstances beyond the consumer's control which can only be addressed through the cancellation of debt.


Filing for bankruptcy puts into effect an automatic stay, which stops creditors from trying to collect any debt from you. The automatic stay immediately stops creditor phone calls, collection letters, wage garnishments, lawsuits, bank levies, and all other types of harassment, intimidation, and scare tactics by creditors. Once a bankruptcy case is successfully completed, the consumer receives discharge information from the Bankruptcy Court. A Discharge is a legal release from debts.

Creditors are left with no legal cause to contact you or pursue debts listed in the bankruptcy documents.


There are two common ways for the typical consumer to file for bankruptcy, Chapter 7 and Chapter 13. Chapter 7 is the most common type of bankruptcy. It allows a consumer to discharge debts completely through a relatively short process. Chapter 13 is a federal debt consolidation plan which allows you to rearrange your financial affairs and repay just a portion of your debts. In most cases, the idea is to allow you time to get back on your feet.