How Does Bankruptcy Work?

Bankruptcy is a legal process that allows individuals or businesses to have their debts discharged or reorganized. It can provide relief from harassing creditor calls and lawsuits, and can stop wage garnishments and property foreclosures.

There are several types of bankruptcy, but the two most common for individuals are Chapter 7 and Chapter 13.

Chapter 7 bankruptcy involves selling non-exempt assets to pay off creditors, with the remaining eligible debts being discharged.

Chapter 13 bankruptcy involves repaying creditors over a period of three to five years through a court-approved payment plan, with the remaining eligible debts being discharged upon completion of the plan.

To file for bankruptcy, one must meet certain eligibility requirements, complete credit counseling, and provide a detailed list of assets, liabilities, income, and expenses to the court.

The bankruptcy process can be complex and it is recommended to seek the advice of a bankruptcy attorney.