Bankruptcy is a legal status of a person who cannot afford to pay back their creditors. You will need to get legal advice for filing bankruptcy as this guide is not complete.
There are several types of bankruptcy. They include:
Chapter 7 – Property you own that is of value will be turned into cash to pay back your debts. A trustee will be appointed to take over your property. You may be able to keep some personal items and some real estate.
Chapter 11 – Used mostly by businesses. You are able to keep your business, but the court and your creditors must approve a repayment plan.
Chapter 12 – Only for family farmers or family fisherman and is handled like a Chapter 13.
Chapter 13 – You can usually keep your property, but you will still have to pay back some of your debts from wages you earn at your job. Your repayment plan and budget must be approved by the court. A trustee will be appointed. You will make your payments to the trustee and the trustee will make sure to pay your creditors and will also make sure you stick to your repayment plan.
A bankruptcy can be reported on your credit report for up to 10 years and may affect your ability to qualify for credit in the future.