If you can’t pay off your debts, filing for bankruptcy may be an option for you. The specific process and consequences of filing for one will depend on the type that is filed, but the most common types are Chapter 7 and Chapter 13.
With Chapter 7, you will need to liquidate your assets in order to pay off your creditors. A trustee is appointed to oversee the process and will sell the debtor’s non-exempt assets to pay off creditors.
Once the assets have been sold, any remaining debts are typically discharged, meaning that the debtor is no longer responsible for paying them.
However, the debtor may still be required to pay certain debts, such as student loans or taxes.
Chapter 13 involves creating a repayment plan to pay off debts over a period of 3-5 years. The debtor is allowed to keep their assets and pay off their debts over time. Once the repayment plan is completed, any remaining debts are typically discharged.
Filing for bankruptcy can have significant consequences, including damage to the debtor’s credit score and the potential loss of assets. It can also affect the debtor’s ability to obtain credit in the future. But certain debts may not be discharged this way.
Note that the laws and procedures involved can vary by jurisdiction. So if you’re considering it, seek the advice of a qualified financial attorney to help you navigate the process.