If you are thinking about filing bankruptcy, here are some things that you should know.

First, you should understand the different types of bankruptcy, what they mean for you, and which is the best option in your situation.

You would typically file chapter 7 bankruptcy if you wanted to ‘wipe out’ your debt instead of simply obtaining an easier way to pay it off as one would do with a Chapter 13 bankruptcy.

Chapter 7 bankruptcy eliminates debt completely, Chapter 13 bankruptcy results in a reorganization of amounts owed, interest rates paid, and the length of time over which the debts are going to be paid back.

Regardless of whether a person goes through Chapter 7 or Chapter 13 bankruptcy, their credit rating will be adversely affected for some time to come. A Chapter 13 bankruptcy remains on the individual’s credit report for seven years. A Chapter 7 bankruptcy remains on the individual’s credit report for ten years.


Generally speaking, most businesses are hesitant to extend credit to someone who just went through a bankruptcy, largely because they feel that the person cannot handle money properly. The stigma of a personal bankruptcy on one’s credit report can and does have adverse effects on not only one’s ability to obtain future credit but may also have an adverse effect when attempting to rent property and applying for a job.

For those who are looking for a completely fresh start and who have little or no personal property, chapter 7 is usually the best way to go.

If you file for this type of bankruptcy and you have assets that can be sold off, they will be sold to help pay your debts. Some items, such as your primary home, motor vehicle, clothing and so forth are exempt from sale to pay off your debts under Chapter 7 bankruptcy. The list of exempt items varies from state to state.

Typically, the majority of people filing bankruptcy continue paying on their home and their car just keep them out of the bankruptcy proceedings.

Second homes, second cars, boats, and similar items can be taken and sold to pay debt.

Generally speaking, with the Chapter 7 bankruptcy, the debt simply disappears and the people and business to whom the money was owed will never be able to collect it.

Chapter 7 is the least complicated type of bankruptcy and the most common because most people who file for bankruptcy lack the financial means to reorganize their debts and pay them off under Chapter 13.

Typically a Chapter 7 bankruptcy takes only a few months to complete although the complexity of the case and prevailing work load of the courts will to a large degree determine how long it takes to complete the case.

A Chapter 13 bankruptcy on the other hand is set up in such a way that the debtor has either three or five years to pay off their debts and throughout that period the finances of the individual going through bankruptcy will be under the review and control of the bankruptcy trustee appointed to handle the case.

The bottom line on personal bankruptcy of either type is that it should be considered only as a last resort, as both Chapter 7 and Chapter 13 bankruptcies have drastic and long lasting effects on one’s ability to function in a world which to a large degree is driven by credit and one’s credit worthiness.