If you or a family member needs a fresh financial start, filing for Chapter 7 bankruptcy may be the answer. If you qualify, this type of bankruptcy provides immediate protection from creditors and allows you to erase certain types of debt.
Know that filing for bankruptcy does not mean losing everything you own. Federal and state exemptions may allow you to keep much or all of your property, including a vehicle, professional tools, jewelry and other personal property up to a certain dollar amount.
Debts that Chapter 7 can erase
With certain exceptions, Chapter 7 bankruptcy wipes out most types of debt, including:
- Payday loans and finance company loans
- Unpaid phone or utility bills
- Credit card debt
- Medical debt
- Car loans
Additionally, filing for Chapter 7 may allow you to prevent foreclosure or eviction, repossession of property and garnishment of your wages.
Debts that Chapter 7 cannot erase
Examples of debts that are not eligible for bankruptcy relief include student loans, child support, alimony payments and fines owed for a criminal offense. Additionally, you may not be able to eliminate a debt if you forget to list it when filing your paperwork.
Bankruptcy and your credit score
In the long run, having a bankruptcy on your report may be much better for your credit score than continuing to owe money you cannot pay. By wiping out debts currently hurting your score, bankruptcy offers you a fresh opportunity to begin rebuilding your credit instead of continuing to fall further and further behind.