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Bankruptcy File Bankruptcy Chapter 7 Bankruptcy Chapter 13

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Bankruptcy is a federal court process that helps individuals and businesses repay their debts incurred as a result of unemployment, large medical expenses, seriously over-extended credit, marital problems and other large unexpected expenses.

 There are two basic kinds of bankruptcy

1. Liquidation or Chapter 7 Bankruptcy.
   
   Chapter 7 Bankruptcy refers to that chapter of the bankruptcy law under which an individual or company allows his assets to be sold off (liquidated) to pay creditors. It lets you eliminate (discharge) most of your debts in exchange for giving up property that is not protected by "exemption" laws in order to give you, the debtor, a fresh start. A bankruptcy trustee sells your property and distributes the money to your creditors. Any remaining unpaid debt is wiped out. If you don't have much property, you may get to keep what little you have.
   
   
2. Reorganization or Chapter 13 Bankruptcy.
   
   Chapter 13 bankruptcy allows you to rearrange your financial affairs, repay a portion of your debts and put yourself back on your financial feet. The objective is to give creditors a fair share of the money that you can afford to pay back. Under a typical plan, you make monthly payments to someone called a bankruptcy trustee, who is appointed by the bankruptcy court, for three to five years. The bankruptcy trustee distributes the money to your creditors.