Bankruptcy - Not an Easy Way Out

Negative Consequences
Bankruptcy is a legal procedure to have debts discharged so creditors can’t collect on that debt. A "discharge" in bankruptcy means that you are legally free and clear of any obligation to repay certain debts. The creditor no longer has any legal right to collect that debt, and you have no legal obligation to repay it. People file for bankruptcy when they cannot pay their debts. While bankruptcy may sound like an easy way out to avoid responsibility for debts (provided a person qualifies for bankruptcy) it can have serious long-term negative consequences and should be considered only as a last resort. The following is a general discussion of the bankruptcy process. Please consult with an attorney knowledgeable in bankruptcy law for more complete information and prior to considering bankruptcy.

Chapter 7 and Chapter 13 Bankruptcies
There are two types of bankruptcy for consumers:

• Chapter 7 bankruptcy wipes out all allowable debts. It creates a bankruptcy estate out of the debtor’s property, which may then be sold to pay off the debts.
• Chapter 13 bankruptcy is a court-approved repayment plan. Debtors repay their debts over three to five years and must submit a plan to the court detailing how they propose to pay off the debts.