Bankruptcy is a legal process that provides individuals and companies with a way to start over financially when they can't pay their debts. It begins when a person or business cannot pay outstanding obligations and involves the liquidation of assets to pay off creditors. The most common type of bankruptcy is Chapter 7, also known as total bankruptcy or liquidation. This chapter of the Bankruptcy Code provides for the sale of non-exempt property from the debtor and the distribution of proceeds to creditors.
When you file for Chapter 7 bankruptcy, it will end your mortgage loan, but you will have to give up your home. Chapter 13 bankruptcy is another option, which is about reorganization. This type of bankruptcy allows you to pay off debts according to a payment plan and keep up with your mortgage payments once the bankruptcy has been filed. When you voluntarily agree to secure a debt with a property, such as a mortgage or car loan, you must pay what you owe or return it in the event of bankruptcy.
However, you won't be able to keep the house, car, computer, or other items that guarantee repayment of the loan. Bankruptcy is a complex process and it's important to understand all of your options before making any decisions. It's also important to note that filing for bankruptcy can have long-term consequences on your credit score and financial future. Therefore, it's best to consult with an experienced attorney who can help you understand the process and make an informed decision.
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