Bankruptcy is a situation that many people get themselves in either voluntarily or involuntarily. Depending on which chapter the case has been filed under, one can stay in this situation for not more than ten years. Chapter 13 or the salary earner chapter, allows for the debtor to continue paying even when the petition has been filed. In this case, the debtor makes a repayment plan for the creditors and files it along with the petition.

Under chapter seven or the liquidation chapter, the assets of the debtor can be sold by the trustee and the proceeds divided among the creditors who have proven claim over the assets of the debtor. In the new rule of discharge from insolvency, anyone who becomes bankrupt after the year 2004 is discharged from financial distress after one year no matter how much they owe. This can also happen if the debtor has already paid their debt way before the order had been made in court.

There are cases in which ones financial case cannot be nullified. This happens in cases where the debtor had been faced with bankruptcy before. There are other alternatives to insolvency. One of this is the individual voluntary agreement. This is a formal arrangement done in court to have the creditors restrained from pushing the debtors for payment.

This will mostly be applicable for people with large amounts of income since they will be required to make huge amounts towards recovering the debt. Another option is the fast track individual voluntary agreement in which the case is nullified. In this case, the debtor has to draw up a plan of how the debt will be paid off. In this case, the debtor will have to pay much more than they would have otherwise paid.