Bankruptcy is a legal process to relieve overwhelming debt on a person or company. You file with the court and someone is assigned to look over your finances to determine how much of your debt is wiped clean.
Chapter 7 bankruptcy is the one most people think about, when you file to have your debts wiped clean. This is when you don’t make enough money to reasonably keep up and you don’t have a lot of property you can sell.
Chapter 13 bankruptcy, also called a wage earner’s plan, is for people that make too much money to file chapter 7, usually around the median household income in your area, or that have a lot of assets they don’t want to lose.
Pros of filing bankruptcy are that immediate relief from the debt, from those constant collection agency calls and you get to start over.
That bankruptcy will stay on your credit report for up to 10 years, making it difficult to get a mortgage or big loans for three- to five-years.
You won’t be able to file bankruptcy again for eight years and you could lose some of your assets like a second home or cars in that Chapter 7.