Bankruptcy is a process of the federal court to help either business or individuals clear up their debts and repay under the protection given by the bankruptcy court. There are basically two types of bankruptcy: liquidation and reorganization.

According to chapter 7 bankruptcy, liquidation bankruptcy occurs when you plead the court to have your debt discharged. The bankruptcy court will liquidate or sale some of your properties, returns of which shall be divided among your creditors. Liquidation bankruptcy proceeding last for four to six months, which is quite fast and simple because only one appearance at the courthouse is necessary. This is definitely very convenient and doesn’t require payment stretched over time.

Many people, if given a choice, would prefer this type since repayment of a portion of the debt is unnecessary. You may lose some of your properties but some courts permit some sort of a leeway that doesn’t take all to give you something to start with afterwards.

On the other hands, based on chapter 13 bankruptcy, reorganization bankruptcy happens when you file to a bankruptcy court a plan on how you intend to settle your debts. You indicate how much each of your creditors will get, depending on your fnances. There will be a three or five year repayment plan, only after which can you be discharged of your debts, if any still remains. But however, due to obvious financial difficulties, what usually happens is the court itself decides to give a discharge earlier than you had planned.

Although bankruptcy is generally advantageous, it must be considered as a last resort. You should, in all circumstances, work hard to be in full control of your financies to avoid being estranged in difficulties. Discipline is for sure a very crucial thing that must be maintained at all times.