Some basic information about bankruptcy to know is that there are two basic types of bankruptcy options available to individual consumers. One is Chapter 7 and the other is Chapter 13. Chapter 7 lets you discharge most types of debt, and in exchange for that, you have to give up property you own that you can’t exempt under the applicable laws. The whole process takes about three to six months. In most Chapter 7 bankruptcies, you get to wipe out almost all of your debt (there are a few that you can’t – such as child support, recent taxes, alimony and student loans), and you don’t have to give up any property the way the exemption system works.

Chapter 13 lets you get rid of most of your debt, and in exchange, you pay all of your remaining debts to a trustee who has been assigned to manage your case. He or she will disburse your funds to your debtors for a three to five year period of time, depending on what your income is. If you’re a higher income person, you’ve got to pay for 5 years; if you’re a lower income person, you’ll have to pay for 3 years. You’ve got to repay at least as much as your non-exempt property is worth. For example, if you have a boat, and the boat is worth $10,000 in Chapter 13, your plan has to offer to pay at least that $10,000. If you filed a Chapter 7, you’d have to give it up and let it be sold for the benefit of your creditors. Therefore, your creditors get the benefit of your non-exempt property whether you file a Chapter 7 or a Chapter 13.

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