Bankruptcy in a nutshell

There are two basic forms of bankruptcy for the (non-business) debtor. 

Chapter 7 Bankruptcy. The debtor wipes out unsecured debts. On very rare occasions, the debtor gives up some of her property which is sold by the Trustee to help pay the unsecured creditors. Most cases are “no-asset” cases, meaning that the debtor gives up no property. The home and car (secured debts) are not protected. Chapter 7 is usually over in four months. 

Chapter 13 Bankruptcy. Under a 3 to 5 year monthly repayment plan, the debtor pays her debts—secured and unsecured—and keeps all her property, including her house and car. Of course, Chapter 13 lasts for the length of the payment plan. 

Immediately after either bankruptcy is filed, an “Automatic Stay” goes into effect ordering creditors to cease (stay) all collection activities. 

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