Among the common people of America, bankruptcy is somewhat frowned upon. I don't know if it's pride that makes a person associate "bankruptcy" with "failure", or if it's the amount of encouragement we are given to not file for bankruptcy.
Actually, bankruptcy is one of the most misunderstood gifts one could enjoy as a U.S. citizen. Well off families do it all the time, alternating between husband and wife, thus enabling them to virtually limitless financial opportunities. There's something good about being able to erase your mistakes and start anew. I call it "financially repenting". Say it with me now...financially repenting.
While I am aware of the various types of bankruptcy, I wasn't familiar with what each type entailed. So I did a little research, so check it:
Chapter 7 is like a liquidation. A trustee is appointed to supervise certain assets of yours to equally distributed among creditors. Chapters 11, 12 and 13 is like credit rehab. More like debt consolidation. You'll use future earnings to pay off creditors.
The newest addition to the bankruptcy files is the Bankruptcy Prevention and Consumer Protection Act of 2005. This converts Chapter 7 into Chapter 11 or 13 depending on your situation. This Act also requires you to undergo credit counseling and credit awareness courses before you're allowed to proceed and/or before being discharged from debt. Of course there's more to bankruptcy than what's been explained here, but for the sake of my fingers this abbreviated version will have to suffice.