Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills can get a fresh financial start by discharging debts. Filing bankruptcy immediately stops most of your creditors from taking any legal action against you while you are in your bankruptcy case.

What can bankruptcy do for me?

Bankruptcy may make it possible for you to:

• Eliminate the legal obligation to pay most or all your debts. It is designed to give you a fresh financial start.
• Stop foreclosure on your house and allow you an opportunity to catch up on missed payments. Bankruptcy does not, however, automatically eliminate mortgages or other liens on your property without payment.
• Prevent repossession of a car or other property or force the creditor to return property even after it has been repossessed within a certain time frame of filing a bankruptcy case.
• Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
• Restore or prevent termination of utility service.

Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for everybody. In bankruptcy, it is usually not possible to:

• Eliminate certain rights of "secured" creditors. A "secured" creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You may be able to force secured creditors to accept payments over time in the bankruptcy process and bankruptcy may eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt.
• Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony and certain other debts related to divorce, student loans, court restitution orders, criminal fines, and taxes
• Discharge debts that arise after bankruptcy has been filed.