Bankruptcy Options: Which Type Clears All Debt?

Bankruptcy can be a complex process, and understanding the different types is essential before making a decision. Chapter 7 bankruptcy is often what people think of when they consider wiping away their debts. It allows individuals to eliminate most unsecured debts, such as credit card debt and medical bills. However, not everyone qualifies for Chapter 7.

To be eligible, you typically need to pass a 'means test,' which examines your income and expenses. If your income is too high, you may not qualify and might need to consider Chapter 13 bankruptcy instead. Chapter 13 involves creating a repayment plan over three to five years.

In a Chapter 7 bankruptcy, non-exempt assets may be sold to repay creditors. Exempt assets, which vary by state, are protected. Common examples include a certain amount of equity in your home, personal belongings, and retirement accounts. It's crucial to consult with a bankruptcy attorney to understand the implications of each type of bankruptcy and determine the best option for your financial situation. They can help you navigate the legal process and ensure you are making informed decisions.