Personal bankruptcy is a federal court process designed to help consumers get rid of their debts or repay them under the protection of the bankruptcy court. Bankruptcies are typically described as “liquidation” (Chapter 7) or “reorganization” (Chapter 13). Under a Chapter 7 bankruptcy, you ask the bankruptcy court to discharge the debts you owe. Under a Chapter 13 bankruptcy, you file a plan with the bankruptcy court proposing how you will repay your creditors. You must repay some debts in full; others may be repaid only partially or not at all, depending on your circumstances.
When you file either kind of bankruptcy, a court order known as an “automatic stay” immediately goes into effect. The automatic stay prohibits most creditors from pursuing the collection of debts you owe them unless the bankruptcy court lifts the stay and lets the creditor proceed with collections.
Certain debts will not be discharged in bankruptcy; you will continue to owe them just as if you had never filed for bankruptcy. These are child support, alimony, and certain kinds of tax debts. Student loans will usually not be discharged unless you can show that repaying the debt would be an undue burden. And other types of debts might not be discharged if a creditor proves to the court that the debt should survive your bankruptcy.
Obviously there are many facets to bankruptcy that only an expert can be familiar with. To get all of your Chapter 7 and 13 bankruptcy questions answered, it would be a good idea to speak to an experienced bankruptcy attorney.
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