Types of bankruptcy

Chapter 7

This is also called a liquidation bankruptcy because the bankruptcy court forgives most debts that are not secured by collateral or property (mortgages are secured by real estate and car loans are secured by the vehicles). In addition, you are allowed to keep certain "exempt assets."

Under Chapter 7 a court appointed trustee takes possession of your non-exempt property, arranges for its sale or liquidation and is responsible for paying as many of your debts as possible with the proceeds. (NOTE: Not all debts can be erased by bankruptcy)

Chapter 13

Also called a reorganization or repayment bankruptcy, Chapter 13 is an option if you have a source of dependable income but are unable to pay your debts. Filing for a Chapter 13 allows you to pay your debts in installments over an agreed-upon amount of time. The court must approve your plan to repay all or part of the money you owe. You generally may keep all your property as long as you continue to pay the installments. Alimony and child support payments and long term secured obligations such as your mortgage cannot be discharged.

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