The bankruptcy law in the USA is designed to assist people who simply cannot pay their debts any more. It does so by decreasing or discharging the outstanding balances. Bankruptcy could be the decision of the individual or, in some cases, creditors can apply to a court to force an individual to file. It is a legitimate means to and end of financial problems for those who are in over their head and for whom, even significant changes to their spending habits would not permit them to be able to pay back the outstanding debt within 5 years.
There are two types of bankruptcy available to individuals or consumers in the United States. These are chapter 13 bankruptcy and chapter 7 bankruptcy. In terms of how often you can file for either of these, chapter 7 is every 8 years and chapter 13 every 6 years.
Filing chapter 7 bankruptcy is what most people consider to be 'bankruptcy' and is the bankruptcy in which much of your debt is discharged altogether. Chapter 13 is where you are set up with a payment plan lasting three years, by which you will repay debt owed.
Under changes made to legislation by Congress in 2005, if you are considering filing chapter 7 bankruptcy, you must first have completed a credit counseling program allocated through a US Trustee's office. You will have to prove your completion of this and it must have taken place within 6 months of the date you file.
Then, of course, you need to know if you even qualify. This has been tested, since 2005, through something known as the Means Test. If you earn more than the median income for the state in which you are filing, then you will be required to undergo this means test to decide whether or not you really need to file bankruptcy or not.
