For the average individual, there are two main types of bankruptcy: Chapter 7 and Chapter 13. The main differences between these two involve what gets surrendered when bankruptcy is declared.
When filing Chapter 7, it is important to understand what specific assets you may have to surrender as determined by your state. Depending on the state, exempt items can include: work related tools, household furnishings, etc.
Chapter 13 differs from Chapter 7 because the individual can keep a mortgaged house or car. Individuals then have 3-5 years to pay off the debt rather than surrender the property.
There are a few areas that bankruptcy does not normally apply:
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Alimony
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Child support
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Taxes
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Fines
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Student loans
Once bankruptcy is filed, the court will stop all of the interest on the debt from accruing. A drawback to declaring bankruptcy: it’s hard to obtain a decent credit rating in the future. The bankruptcy is a part of public record and can remain on an individual’s credit report for up to 10 years. ■
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