Bankruptcy is an option many people know about, but don't know
how it affects them and details associated with it. Bankruptcy
is "being legally declared unable to pay your debts".
Contrary to popular belief, bankruptcy does not wipe out all
debts. Student Loans, Alimony, Support Payments, and other legally
imposed debts are not affected by bankruptcy, and you must still
pay these debts if you go bankrupt. Most consumers filing bankruptcy
could have probably taken other steps to liquidate their debts,
and some are undoubtedly regretting their decision. Bankruptcy
is not easy and has severe long-term effects on your financial
well-being.
There are two main types of bankruptcy for consumers. These are
Chapter 13 (Personal Reorganization) and Chapter 7 (Straight)
bankruptcy.
Chapter 13
This is called Personal Reorganization because you reorganize
your financial situation and propose a repayment plan to pay as
much of your debts as you can in 3-5 years. Debts not paid within
this period of time are discharged by the court.
Chapter 7
The court forces you to sell certain ownings to pay back debts.
If debts are still not paid for after you sell your ownings,
they are discharged by the court. You do get to keep a certain
percentage from property sold.
Bankruptcy's effect on your future
Alternatives to Bankruptcy