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When an individual or business declares bankruptcy all assets must be disclosed to the courts.
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In some bankruptcy cases a debtor is able to keep some of their personal property or assets.
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In the United States there are six bankruptcy types including Chapter 7, Chapter 9, Chapter 11, Chapter 12, Chapter 13, and Chapter 15.
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Chapter 7 is the simplest and fastest bankruptcy in the U.S.
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Chapter 9 is for municipal bankruptcy.
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Chapter 11 allows for a business to continue while it works out debt repayment.
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Chapter 12 is bankruptcy rehab for fisherman and family farmers.
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Chapter 13 is a 'wage earner bankruptcy' which allows for repayment while working.
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Chapter 15 is foreign debt and international bankruptcy.
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People who declare bankruptcy are not necessarily 'deadbeats'. They may find themselves unable to pay their debts because of illness, unplanned medical expenses, divorce, death, job loss, or disability - reasons that were not planned.
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When an individual files for bankruptcy, depending on where they live, they may be able to keep some of their home's equity, their car, and some furniture and clothing.
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Some debts are not erased when an individual files for bankruptcy. These debts can include child support payments, legal fines, some student debts, car loans, mortgages, and alimony payments, depending on where the individual lives.
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Even though a person or business files for bankruptcy, it is not free. There are legal costs associated with filing for bankruptcy that will have to be paid. These costs are not erased in the bankruptcy proceedings either.
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There are alternative options to filing for bankruptcy that can help a person avoid it. These options can include debt consolidation loans (where debts are paid off by a loan, which can help get rid of high interest rates on credit card loans), debt management plans, and consumer proposals (when a portion of debt is paid off and the rest is erased).
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Bankruptcy is damaging to a person's credit rating but it doesn't last forever. The bankruptcy stays on a person's credit report for many years, depending on the country. When that person applies for a mortgage or loan the bank may refuse to loan them money because they feel it is a credit risk, but in many cases if the person has rebuilt their credit rating they may have no problem getting a loan or mortgage even with the bankruptcy on their credit report.
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