Benefits of Bankruptcy
As soon as a bankruptcy case is filed with the court, it provides significant protection from creditors. This protection is called the automatic stay. The automatic stay stops wage garnishment, prevents foreclosure, ends creditor harassment, closes lawsuits, and gives bankruptcy filers peace of mind.
The main purpose of filing bankruptcy is to get a discharge. A discharge is the permanent cancellation of debt. Once you receive a discharge in a bankruptcy, creditors can never collect on the discharged debt. Certain types of debt cannot be discharged in most cases. These include student loans, child support and recent income taxes.
Types of Bankruptcy
Chapter 7: The liquidation of assets to pay creditors. Debtors can keep a certain amount of property called exemptions.
Chapter 11: Reorganization or liquidation used by businesses or individuals who don't qualify for Chapter 13.
Chapter 12: Primarily used by family farmers.
Chapter 13: A payment plan also referred to as debt reorganization.