What Is and Is Not Included in Bankruptcy
Bankruptcy laws are complicated, and the answer to what is and is not included in personal bankruptcy can vary by your local state laws as well as whether you file for Chapter 7 or Chapter 13.
When you file Chapter 7 bankruptcy, it typically includes liquidation of all nonexempt assets. Vehicles, work-related tools and household furnishings may be considered exempt, but your other property may be considered nonexempt, and can be turned over to your creditors or sold by a trustee. To avoid foreclosure or repossession, you must ask the bankruptcy courts permission to "reaffirm" your mortgage loan and lease agreement. When you reaffirm a debt, you’ll be provided with a new payment plan. Then, you must continue to make your home loan and auto lease payments.
If you file Chapter 13, you usually are able to keep many of your assets, as long as you maintain steady income and continue to make your agreed-upon payments.
Regardless of the type of bankruptcy you file, some debts are not dischargeable in bankruptcy. These include back taxes less than three years old, alimony, child support, and debts incurred through fraud.