Certain basic concepts apply under both Chapter 7 and Chapter 13. Bankruptcy proceedings are commenced by filing a petition with the bankruptcy court. The petition lists all of your assets, liabilities and other financial and personal information required under the Code. You cannot pick and choose which creditors to include on the petition, as all creditors must be listed, but that doesn't mean you cannot keep your home or vehicle, as will be explained later. You may file as an individual, or jointly as husband and wife. Married couples do not have to file jointly if substantially all debts are solely in one spouse's name.

The filing of the petition invokes the “automatic stay.” This means that your creditors are immediately prevented from doing anything to compel collection of a debt once the petition has been filed. The harassing calls, garnishments, law suits, foreclosures, repossessions or shutting off of utility services are all stopped. The "stay" is designed to give you time to sort out your affairs free from the harassment of creditors.

In the petition, your debts are classified as either priority, secured or unsecured. Each is treated differently depending on which chapter is filed. Priority debts in consumer cases are usually limited to government tax liabilities and support obligations. Priority creditors have certain rights to payment over other creditors.

Secured debts are backed by property pledged as collateral, and typically consist of vehicle loans and mortgages. The creditor has a lien, or right to recover the property upon default. In most cases, these liens are created pursuant to the written agreement signed when the pledged property is purchased or upon a creditor extending a loan.

Unsecured debts are almost every other type of debt not backed by collateral. They include credit cards, utilities, medical bills, store charges and unsecured personal loans. Unsecured creditors do not have a lien or collateral interest in any of your property.