- How does bankruptcy work?
So, you’re thinking to file bankruptcy, but you are confused as to how it works. You have asked your friends and relatives, but seem to receive different answers depending on whom you ask. There is a very good reason for these different answers. These disparities exist because there are actually different types of personal bankruptcy.
Two major types of bankruptcy exist:
The two most common forms of personal bankruptcy are Chapter 7 and Chapter 13. The U.S. bankruptcy laws require anyone who files bankruptcy to take a means test. This is not really a test at all – instead, it’s a way for the courts to determine if you qualify to file for bankruptcy. If this means test shows you actually make enough money, from your sources of income to pay back some or all of your debt, then you may file for Chapter 13 bankruptcy and enter into a three to five year payment plan to pay back a portion of your debt.
Filing Bankruptcy Protection