Bankruptcy is a legal process that is regulated by federal laws to give people that are in debt a needed fresh start. Ok, that would be most anybody; we are all in debt in one way or another. Bankruptcy cancels the debt that you owe. Bankruptcy also makes it possible so your creditors, the people that you owe money to, to get their share of the money that you can afford to pay.

There are two main types of bankruptcy, a chapter 7 and chapter 13. A chapter 7 filing is a liquidation of all of your assets. A chapter 13 is basically a restructuring of debt owed. The chapter 7 is what is referred to a straight bankruptcy whereby you liquidate everything that isn't considered exempt. Exempt items include cars, work related tools and your basic home furnishings. Know that some property the court appointed trustee has the right to sell to try to pay off some of your debt.

Chapter 13 filing is restructuring your debt and is most preferred by people that have assets that they do not want to lose. Some debts may be partially discharged, most are still eliminated, but you enter into a repayment agreement with the creditors that you still owe. Filing a chapter 13 does not allow you to keep any property that you do not enter into a repayment plan on with a creditor.

Talking about exemptions, there are certain state and federal guidelines for what they consider allowable for you to keep. You go through your home and make a list of all that you have and what you feel it is worth. Now, they are not asking for what you paid for it, the worth of anything in your home in regards to bankruptcy is what it would sell at a garage sale for.

Both types of bankruptcy will eliminate all unsecured debt, stop foreclosures, repossessions, wage garnishments, utility shut offs and debt collections. Neither form of bankruptcy eliminates child support, alimony, fines, taxes or student loans. Both types of bankruptcy are equally damaging to your credit, but if you are faced with having to file bankruptcy your credit right now is the least of your concerns.

There are new laws and regulations for filing. You now have to complete credit counseling when you file and again prior to going to court for the meeting of the creditors. I would like to note, in most cases, the court date where you meet with your creditors is really more of a pain then something to fear. In some cases, it could take your entire day, in others maybe an hour. It will depend on the court that you are in and how many people are scheduled the same day.

Hopefully, this helps you understand bankruptcy a little more. In most states you can file yourself, however, I strongly recommend talking with an attorney.