Bankruptcy law has been around for centuries, and in fact may date back to 16th century England. At that time, debtors who did not take care of their financial obligations were often thrown in jail. Over time, the prevailing attitude of punishing the debtor turned on the realization that such punishment did nothing to assist either the creditor or the debtor. Instead, courts began to discharge debt if the debtor showed signs of cooperating and attempting to make payments.
In the 21st century, individuals have a variety of options open to them when declaring bankruptcy. One of the most well-known types of bankruptcy is Chapter 7 bankruptcies, the individual filing in which some of all of a person’s debts are discharged. An alternative to Chapter 7 is Chapter 13, in which the debtor may make a court-approved plan to repay some or most of the debt. Bankruptcy is not for everyone, and each state has its own rules regulating the bankruptcy process. Anyone considering filing for bankruptcy protection should be aware of the rules that exist in their state of residence.
The goal of filing for bankruptcy is to give individuals or families a chance to start over again and to ensure the creditor is repaid if at all possible. Typically, when filing for bankruptcy, individuals get to keep some exempt assets, like a home if it is their primary residence. There are some things that cannot be discharged, such as student loans. A bankruptcy attorney may be able to help individuals facing bankruptcy to maximize the assets they retain through the process.