The first choice one must make after deciding to file for bankruptcy is which chapter of the bankruptcy code is right for them. The two main chapters of the bankruptcy code for individuals are chapter 7 and chapter 13.

Chapter 7 is also known as a straight bankruptcy and is the most common chapter of the bankruptcy code. Under this chapter of the bankruptcy code an individual will turn over all of their non-exempt property. Exempt property is property that one can keep when they file bankruptcy. Each state has different exemptions so you should check with your bankruptcy attorney for the different exemptions in your state. Under chapter 7 an individual will turn over all of their non-exempt property to their bankruptcy attorney, who will in turn take this property and sell it for as much as they can to pay off the individual’s creditors. An individual will have to list all of their debts and financial obligations they want erased on a document known as the statement of financial affairs. Any debts not listed on this document will not be discharged in their bankruptcy so it is highly important that this document is filled out completely and honestly.

An individual should not leave off any debts because they are embarrassed or don’t want their attorney to know about them. Listing any debts that are not real is considered bankruptcy fraud and is a serious crime. It is in an individuals’ best interest to fill out this document completely and truly. An individual will have to take a course in financial management and will have to follow their attorneys’ plan for them. After a certain amount of time, which is dependent on the state, the individual will be discharged from bankruptcy and will be completely free of all of their debts and financial obligations. Most times an individual has little or no property they will have to turn over so this chapter is the most desirable and common.

Chapter 13 is also known as a reorganization bankruptcy. This chapter of the bankruptcy code is desirable to individuals who have non-exempt property they do not want to turn over to their bankruptcy lawyer. This chapter is also desirable for individuals who feel it is the “right thing” to do to pay off their debts as under this chapter an individual will pay as much extra for a certain period of time, usually 3-5 years, as they can to their bankruptcy attorney. Instead of turning over non-exempt property an individual will work with their bankruptcy attorney to reorganize their debts and work out a plan with their bankruptcy lawyer for extra money they can pay off over a period of time, usually 3-5 years to their creditors. Instead of the bankruptcy lawyer selling off an individuals’ non-exempt property to pay off their creditors the bankruptcy attorney will make a plan with the individual on what extra of their income above the living standards set out by each state the individual can pay off to their creditors.

Once an individual has filed for bankruptcy the bankruptcy is on their credit report for 7 years so it is important that an individual takes the advice of their bankruptcy lawyer. A bankruptcy will hurt your credit score, but it is a fresh financial start for individuals who find themselves hopelessly buried in debts they cannot pay off. Once an individual has filed their bankruptcy they can begin fresh with no debts and the ability to start a healthy financial life. After an individuals files for bankruptcy any more assets they earn are 100% theirs and are not a part of the bankruptcy case.

There are many different variations of the bankruptcy code chapters for each state so it is vital that an individual checks with a bankruptcy lawyer before they decide which chapter is right for them and which chapter they want to file their bankruptcy under.