Chapter 7 bankruptcy is a liquidation proceeding in which the debtor’s nonexempt assets, if any, are sold by the Chapter 7 trustee and the proceeds distributed to creditors according to the priorities established in the Code.

In this type of filing for individuals, you can meet some of your financial obligations because you are earning some type of regular income such as wages and you are able to pay part of your income to satisfy your debts. A trustee will be assigned to your case, and you will be given a three- or a five-year repayment plan to pay back your debts according to what you can afford, and you must pay a lump sum each month to the trustee, who will distribute the payments to your creditors. Creditors may not contact you or ask for more than the amount approved in the repayment plan.

Chapter 13 will allow you to keep your assets such as your car or your home. It will also protect your co-debtor from attempts by creditors to collect the debt as long as you are making your payments. At the end of the three- to five-year period, the remaining debts you owe may be erased. However, there may be other rules that apply to a secured claim such as a mortgage or a lien on your car, and you should consult an attorney about the rules that apply to these issues.

During the bankruptcy proceedings a bankruptcy trustee is generally appointed to take care of the day-to-day work on your case. The trustee is not your bankruptcy attorney, and they will not give you legal advice. They may assist you if a creditor continues collection efforts during your case, since a freeze is put on collection efforts and other actions against you while your debts are sorted out. Creditors are notified and given the opportunity to file claims for payment, and some assets are sold to pay back creditors. If the case is resolved in your favor, debts may be discharged, ending your duty to pay and your creditors’ right to collect money from you. Not all bankruptcies are granted, but if you filed under Chapter 7, for example, and it is not granted, you may be able to convert the filing to a Chapter 13.

Some debt will not be dismissed through a bankruptcy, such as most taxes, child support, alimony, most student loans, court fines, criminal restitution and some other debts that must be paid even when your case is closed. There may be a few exceptions, and you should discuss this with an experienced bankruptcy attorney. An experienced bankruptcy attorney will help guide you through the steps of the process and tell you what needs to be done.