When you make the decision to file for bankruptcy, you are going to enter into one of two chapters, 7 or 13. In the event that you don’t have much in the way of assets or income, but a lot of debt, chances are good that you are going to be entered into a chapter 7 bankruptcy. For some, this can be a positive event as it lasts about four months and eliminates all eligible debts in one move. If you own assets with value, you may be able to exempt them from seizure, but there are no guarantees; Chapter 7 requires that assets be liquidated in order to repay debts.
The first thing to understand about bankruptcy, even a chapter 7 bankruptcy, is that almost anyone can file for insolvency. In the event that you have no assets and very little money, you are still able to file. The court will not turn you away just because you are unable to repay. Bankruptcy is designed to help those who are truly in need of debt relief, even if they have nothing for the court to sell.
In some ways, Chapter 7 is harsher than a Chapter 13. The mark from filing a Chapter 7 stays on the credit record for 10 years as opposed to seven for a Chapter 13. However, as time passes, your credit rating does recover from the blow, and you are able to improve your credit score with a little patience.
Certain debts, such as child or spousal support, student loans, lawsuit judgments and certain tax debts do survive a bankruptcy. They can not be discharged and have to be paid out as money allows. However, if there are other debts that do qualify for discharge, it may make it easier to handle the non-dischargeable debts. It’s best to talk to a lawyer about the types of debt you own, and how they are handled in bankruptcy before making the commitment to file.
