• Bankruptcy helps consumers and businesses climb out of debt.Bankrupt. Businessman with empty pockets (with clipping paths) . image by Vitaliy Pakhnyushchyy from Fotolia.com
  
  Bankruptcy is a federal court proceeding designed to help consumers and businesses become debt-free. Two forms are commonly used: Chapter 7 and Chapter 13. Chapter 7 bankruptcies erase some debts; Chapter 13 bankruptcies restructure the debts to make them easier to repay.
  
  

Filing Fees

• Federal law governs bankruptcy proceedings and filing fees. The U.S. Bankruptcy Court sets the filing fees for bankruptcy cases. The fees vary by type of bankruptcy and are subject to change. According to uscourts.gov and totalbankruptcy.com, as of 2010, Chapter 7 bankruptcies cost $299 and Chapter 13 bankruptcies cost $274. The filing fees must be paid to proceed with the bankruptcy.
  
  

Chapter 7 Requirements

• Chapter 7 bankruptcy is available for any individual or business in the United States provided they meet the "means" test. Bankruptcy is designed to help people who cannot afford to repay their debts become debt-free. It is not available to businesses or individuals with sufficient income to repay their debts. Prior to filing a bankruptcy petition, individuals meet with a credit counselor who reviews their debts and assets. Based on a complicated formula, the test determines whether an individual has the means to repay their debts. An individual meets the means test if their income is insufficient to repay their debts.
  
  In addition, individuals and businesses must not have had a bankruptcy petition dismissed within the last 180 days.
  
  

Chapter 13 Requirements

• Corporations and partnerships cannot file for Chapter 13 bankruptcy. To be eligible to file Chapter 13 bankruptcy, an individual or business must reside, have a place of business or own property in the United States. The petitioner must have a regular source of income and owe less than $290,525 in unsecured debt and less than $871,550 in secured debt. Debt is "secured" when a creditor has some interest in collateral of the petitioner. For instance, a mortgage is a type of secured debt; the creditor has an interest in the house if the petitioner cannot pay the debt. Credit card debt, however, is typically unsecured debt; while the creditor can seek the money back from collections, the creditor has no interest in the petitioner's property.
  
  As with Chapter 7, a petitioner under Chapter 13 must not have had a petition dismissed within the last 180 days.
  
  

Disclose Everything and Comply with the Court

• After meeting the basic requirements, bankruptcy petitioners must fill out forms that list their debts, assets, creditors and other financial information. Petitioners must notify creditors about the bankruptcy and comply with court orders and rules. It is critical that petitioners disclose everything. Failure to do so could result in dismissal of the action and the petitioner could face other penalties for hiding income or debts.