Chapter 7 Bankruptcy
There are two types of bankruptcy that individuals can file. Chapter 13 allows a person to reorganize their debts but make some payments on the money they owe. Chapter 7 lets a person erase their debts, giving them a clean slate to start their financial lives over.
Filing for a Chapter 7 bankruptcy allows an individual to essentially get rid of their debts without having to pay back anything to their creditors. It should be noted that a person is usually only allowed to erase their current debts. Debts that have already been charged off are typically not eligible for Chapter 7. In addition, it's important to note that there are some types of debts that are next to impossible to charge off in a bankruptcy. Alimony, child support, and student loans are very rarely allowed to be included in a final filing.
It's also important to realize that just because a person is not required to make on the debt, this does not mean that he or she will not have to give up some assets. While the rules on this vary in each state, it's very common to see people who want to include their auto loan be forced to turn their car into the lender who owns the debt. In some states, a judge can also make a person sell jewelry, real estate, boats, or other items. Because of this, it is usually a good idea to learn what the laws are in the state a person wants to file for Chapter 7 in before starting the process of bankruptcy.
In addition to losing assets, many people are worried about the effect that filing for bankruptcy will have on their credit score. Generally speaking, Chapter 7 bankruptcy can stay on a person's credit report for up to ten years. It can appear on legal records for up to twenty years. During this time, it can be more difficult to get new financing for a car or house, but it is not impossible. In fact, many people report being able to get a credit card within a few months of completing a filing.