The most ubiquitous form of bankruptcy is chapter 7. It compiles at least 65% of all bankruptcies. This procedure is usually called liquidation. Chapter 7 bankruptcy is specifically structured to allow the debtor to eliminate almost all of his or her debts and get a “fresh start.”
There are exceptions. Student loans, alimony, and child support are not removable. Nor are fines by the state, federal government, or the IRS. Student loans, however, may be dismissed by the court if they are deemed to create an undue hardship upon the borrower. You should consult with an attorney to find out just which of your debts are or are not exempt.
Liquidation is the process by which the Bankruptcy Court trustee collects the non-exempt assets, sells them, and distributes the monies to the borrower’s creditors. However, the list of assets which the borrower may keep is usually quite large. Once again, you should consult with an attorney to assess just what you may legally keep.
Most frequently, you may keep your car and your home if you are willing to sign a reaffirmation agreement with your lender, whereby you promise to continue to make payments. The entire process usually takes about three to six months to complete.