A person or company that owes money to someone else (whether an individual or corporation) is known as a "debtor" and the person or entity seeking money from the debtor is known as a "creditor". Generally, there are two kinds of debt: secured and unsecured debts. Secured debts are supported or backed by collateral such as real estate or vehicles, and other debts where equipment, furniture or appliances are purchased on credit. Unsecured debts are ones where no collateral is pledged to secure the obligation such as credit card debts, personal loans, medical and dental bills, personal deficiencies from repossessed vehicles, etc.

There are two basic types of property that debtors' own: personal, such as household goods, money, wages or vehicles; and real property, which is land, buildings or residences. A debtor's property comprises his or her assets and bankruptcy estate. Debts are the same as liabilities.

Under the law, certain amounts of debtor's property are exempt from the reach of creditors, meaning that creditors cannot take certain kinds of property from a debtor if the debtor takes appropriate steps to assert the exemption on his or her property that the law protects. Only a person and not a corporation can assert an exemption.

In any proceeding under the U.S. Bankruptcy Code, a debtor normally seeks to obtain a "discharge" of debts, or escape legal liability. Certain debts are non-dischargeable. The mere filing of a petition under the Code invokes an automatic stay that prohibits most creditor action, utility shutoff, lawsuits, foreclosure, reposession or harassment. Debtors have the right to surrender property to avoid debts and can break leases or contracts if necessary. After completing all requirements, the debtor receives a discharge in most cases.

An individual can only file Chapter 7 once every eight years, but may file Chapter 13 shortly after being discharged in Chapter 7. The means test was adopted in the 2005 BAPCA. It provides a gross income standard that may prevent discharge in a Chapter 7 case and may compel a debtor to be in Chapter 13 for 5 years. To fully understand its application requires a consultation with an attorney.