Chapter 7 bankruptcy is, in some senses, the cleanest way to eliminate your debt. Filing gives you a chance to wipe out what you owe and start over. That’s different than Chapter 13, for instance, where you have to spend years paying off that debt.
One thing to keep in mind, though, is that you may lose property. Before eliminating your debt, you need to liquidate the assets that you own that are not exempt. Selling them off creates capital that can be used to pay off as much of the debt as possible. The rest is then eliminated. The amount that each person has to pay under Chapter 7 is different based on their debts, assets and many other factors.
That said, you do have exempt assets. You don’t have to sell everything that you own. For instance, maybe you have specific tools that you need in your line of work. The bankruptcy filing isn’t meant to take everything you own and leave you with nothing, or it would not be worth getting out of debt in the first place. Don’t worry that you’ll be destitute. But, at the same time, do not assume that you just get to keep everything that you own and eliminate the debt that buying those items created.
As noted, each bankruptcy case really is unique. You have to understand what rights you have, what steps to take and how your specific case is going to impact your financial future. Chapter 7 is not the only option, but considering it may be a good place to begin.
