Bankruptcy: What You Need to Know

Chapter 7 is a straight bankruptcy. You dissolve your debts, but you also have to sell off most of your assets and any monies realized are distributed among your creditors.

You are still liable for:

• credit card charges made within 20 days of filing
• personal loans and installment loans made within 40 days of filing
• alimony and child support
• certain back taxes
• money owed as reparation for intentional harm you caused someone
• debts resulting from fraud

If you have regular employment, you will most likely have to file for a Chapter 13 bankruptcy. This type is somewhat less of a stigma on your credit report, because you do repay your debts through a court-ordered repayment plan that usually stretches over a three-year period. It also allows you to hang on to your assets.

You will still be liable for:

• alimony and child support
• long-term debts that were not fully repaid during the repayment period

Although the bankruptcy will be removed from your credit record after 10 years (seven if it's a Chapter 13), proof of it will remain on file for 25 years in a regional bankruptcy warehouse. For the rest of your life you will have to answer "Yes" to the question, "Have you ever filed for bankruptcy?" or risk serious penalties.

Concerned about what declaring bankruptcy could mean to your credit rating? Interested in more debt management help? Check our our top articles below:

• Is Bankruptcy the End of My Credit Life?
• Debt Management 101
• Dolans Debt Clinic Part II