by: Michael Saunders

The majority of people who file for bankruptcy opt for Chapter 7, which wipes out most unsecured debts. (Unsecured debts are those that aren't linked to specific property, such as a car or a house. So your mortgage is a secured debt; your credit card bills are unsecured.)

Filing a Chapter 7 bankruptcy can mean you have to give up some of your assets (property or cash) to pay your creditors. In reality, most Chapter 7 filers aren't required to give up anything, either because they don't have any assets or because the property they have is "exempt" or protected from creditors. The exemptions vary by state, but they might include household furnishings, clothing, tools you need for work, retirement accounts, and some - or all - of the equity in your home.

If you want to keep property that isn't exempt, you can still file for bankruptcy, but you typically must choose Chapter 13. Chapter 13 requires debtors to come up with a plan to repay all, or most, of their debts within five years. If they successfully complete their plan, they're allowed to keep their property while having any remaining debts erased. Unfortunately, most people fail to complete their Chapter 13 plans, and their cases are either dismissed, allowing creditors to resume collection activities, or converted to Chapter 7s.

A bankruptcy filing can make sense if any of the following apply:  (continued...)
Filing For Bankruptcy - The Implications of Choosing the Right Plan For You?
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