If you go for Chapter 7 bankruptcy, you may have a lot or all of your debts canceled. On the other hand, you might need to sell some or all of your property to pay back creditors. This type of bankruptcy is called ‘liquidation’ bankruptcy.
The whole process can take about 4 – 6 months to complete and there are some charges involved. Moreover, you must complete a credit counseling course.
If you have been declared bankrupt in the past, usually within 6 – 8 years, you might not be eligible to file for Chapter 7 bankruptcy.
To file for this you’ll need to complete a petition and a number of forms that will describe about your property, current income and living expenses, debts, property you owned and the money you spend in the last 2 years and anything that you’ve sold or given away during that time too.
You are, however, exempt from having to sell certain things. The court can’t make you sell your clothes, household furnishings, and necessities such as things you need for working, e.g. your car and other tools.
At the end of this process your debts will be wiped out. Some debts will not allowed to be wiped out and these include things like child support, taxes, and student loans.