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Generally, there are two personal bankruptcy chapters available to consumers.

Chapter 7

  • Liquidation of assets
  • Established for debtors that do not have the ability to pay their existing debts
  • Provides for a discharge (i.e., elimination) of existing debts

Chapter 13

  • Established for consumers with regular income who are temporarily unable to pay their debts
  • Provides for a repayment plan that will repay debts in no more than five years

According to the Federal Trade Commission (FTC), both Chapter 7 and Chapter 13 bankruptcy may help stop foreclosures, repossessions, garnishments, utility shut-offs, and debt collection activities. Both also provide exemptions that allow people to keep certain assets, although exemption amounts vary. Note that personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations.

Consumers filing for personal bankruptcy protection can file on their own; however, bankruptcy laws can be quite complicated. A trusted attorney may prove to be helpful. To find a bankruptcy attorney, you can ask someone you trust to recommend a good attorney or contact the Lawyer Referral Service sponsored by your State Bar Association. Make sure that your lawyer specializes in bankruptcy. Potential retained attorneys should be asked specific questions about their qualifications and fee structure. Finally, you should set a time to meet with the lawyer to determine if you are comfortable working with the person. Filing bankruptcy can be an emotional event so it is imperative that you have a good relationship with your attorney.