Bankruptcy is a legal procedure that provides debt relief to consumers who cannot pay their bills. The decision to file for bankruptcy is a serious step, and is usually taken when other efforts to correct financial difficulties have failed. Most consumers who declare bankruptcy do so under Chapter 13 or Chapter 7 of the U.S. Bankruptcy Code.

• Chapter 13 or "reorganization" allows debtors with a steady income to pay off all or part of their debts over a 3 to 5 year period instead of surrendering property.
• Chapter 7 or "straight bankruptcy" is the most drastic type of bankruptcy. Debtors turn over to a court representative all of their assets for distribution to creditors. Unlike Chapter 13, there is no repayment plan, and the court will then declare that legally the debtors are no longer in debt.

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