Bankruptcy is a legal process that helps you repay your debts under the protection of the Bankruptcy Act. The Act provides two types of bankruptcy options:

Chapter 7: Also referred to as liquidation bankruptcy, when you file for this type most of the unsecured debt is discharged including credit cards and personal loans. It lasts for up to four months and protects most of your assets. When filing for it, you should hire a chapter 7 bankruptcy attorney to guide you through.

Chapter 13: It is also known as reorganization bankruptcy. It helps you to organize a repayment plan and requires you to repay your creditors over time. It doesn’t liquidate any property but it can take you up to five years before you are eligible for it.

Other types of bankruptcy

While the above two are the most common, there are others such as:

Chapter 11: It resembles the reorganization bankruptcy option but only applies to particular creditors.

Chapter 12: It’s often the last resort when filing for bankruptcy and applies to fishermen and farmers.

Bankruptcy and debts

While filing for bankruptcy will protect you from your debtors, it doesn’t discharge you from all your financial woes. Even after filing for it, you still have to pay for:

  • Student loans
  • Child support
  • Criminal fines
  • Taxes
  • Court restitution orders

You should note that filing for bankruptcy costs you money. The cost escalates when you hire a bankruptcy attorney. If you are unable to hire a lawyer, or raise the filing fee you may petition the court for a waiver based on your income which should not be more than 150% of the federal’s poverty line.

Recovering from a bankruptcy

Filing for bankruptcy isn’t the end of your life as you can recover from it although it will take you some time. Some of the ways to reconstruct your credit include: Paying bills on time, obtaining a secured credit card and using a credit card, savings and checking account to transact most of your business.


When you are going through tough economic times and you need time to restructure yourself, it’s wise that you file for bankruptcy. All you need to do is to get a chapter 7 bankruptcy lawyer or any other legal expert to guide you through the process. If you don’t like to file for bankruptcy, there are other options that you have.  You can restructure your loan payment, or consolidate your credit.