It is a court order releasing a debtor from all of his or her dischargeable debts and ordering the creditors not to attempt to collect them from the debtor. A debt that is discharged is one the debtor is released from and does not have to pay. Some debts, however, are not released by a chapter 7 discharge, and some people are not eligible for a chapter 7 discharge.

The filing of a Chapter 7 case automatically stays or stops most lawsuits and attachments that have been filed against a debtor. A few days after the Chapter 7 is filed the court will mail a notice to all creditors ordering them to refrain from any further action against a debtor. If a debtor cannot wait this long, it is permissible for the debtor or the debtor's attorney to notify one or more of the creditors of the filing of the case. Any creditor who intentionally violates this court order may be liable to the debtor in damages.

It is illegal for either private or government employers to discriminate against a person as to employment because that person has filed under Chapter 7. It is also illegal for local, state, or federal government units to discriminate against a person as to the granting of licenses (including a driver's license), permits and similar grants because that person has filed under Chapter 7.

Both husband and wife should file if some debts to be discharged are owed by both spouses. If both spouses are liable for some of the debts and only one files under Chapter 7, the creditors often try to coerce the non filing spouse into paying the debts, even if he or she has no income or assets.

Chapter 13 is usually preferable to the debtor under following circumstances: (1) the debtor desires to repay all or most of their unsecured debts and has the income with which to do to so in a reasonable time, (2) the debtor has valuable nonexempt property pledged as security for debts, either of which they would lose if they filed under Chapter 7, (3) the debtor is not eligible for discharge under Chapter 7, (4) the debtor has one or more substantial debts that are not dischargeable under Chapter 7, or (5) the debtor has sufficient assets with which to repay their debts, but needs temporary relief from their creditors in order to do so.

Under Chapter 13, the court possesses the power to aid the debtor in ways the private debt consolidation services do not have. For example, the court has the power to prohibit the creditors from attaching or foreclosing on the debtor's property, the power to force unsecured creditors to accept a Chapter 13 plan that does not pay their claims in full, and the power to discharge a debtor from unpaid portions of debts. Private debt consolidation services have none of these powers.

There are 4 methods of dealing with secured creditor under Chapter 13: (1) they may accept the proposed plan, (2) they may be allowed to retain their lien and be paid the full amount of their secured claim under the plan, (3) their collateral may be surrendered to them, or (4) they may be dealt with outside the plan. It is important to realize that a secured creditor can be considered to have a secured claim only to the extent of the value of the property securing the claim. For example, if a secured creditor has a mortgage on an automobile, and if the automobile is worth $500, then that creditor has a secured claim for only $500, regardless of how much is owed to them. If the debtor is at fault to a secured creditor, the default must be cured (made current) within a reasonable time. Also, interest must be paid on secured debts.

A person meeting the eligibility requirements may file under Chapter 13 if their business is not incorporated. A debtor who owns their own business is normally permitted to continue to operate the business during the Chapter 13 case.

A typical Chapter 13 plan should not last longer than sixty months, and may be completed sooner depending on the debtor's circumstances.

A debtor can usually convert a Chapter 7 case to a Chapter 13 case prior to receipt of a discharge or dismissal of the case.

A debtor may include a range of debts from secured to unsecured; even debts that are non-dischargeable such as student loans may be included in the Chapter 13 plan.

A typical Chapter 7 plan should not last longer than six months, and may be completed much sooner.

When a debtor files bankruptcy, an "automatic stay" is typically imposed. As a result of the automatic stay, which may be lifted under certain circumstances, a creditor cannot continue to collect a debt from a debtor through collection activity such as calls to a debtor. If a creditor desires to correspond with a debtor, and a debtor is represented by counsel, the communication in almost all situations must be sent to a debtor's attorney.

In short, a debtor who files bankruptcy should normally expect that creditor collection actions including a garnishment or a repossession to stop.

A debtor can obtain credit after bankruptcy. Each creditor makes a decision on whether to extend credit by looking at a number of factors. While bankruptcy can be a factor, it is not necessarily determinative.