Chapter 7 is known as straight bankruptcy, or liquidation bankruptcy. This means your assets will be sold, with a few exceptions. Exempt property may include cars, work-related tools and basic household furnishings. Some property may be sold by a court-appointed official-a trustee-or turned over to creditors. You can receive a discharge of your debts under Chapter 7 only once every six years, and it stays on your credit report for 10 years. Bankruptcy, however, is for life. Loan applications and many job applications ask if you have ever filed for bankruptcy. Ever. If you lie to get a loan because your bankruptcy is very old, technically you have committed criminal fraud.

Both Chapter 7 and Chapter 13 bankruptcies may get rid of unsecured debts and stop foreclosures, repossessions, garnishments, utility shut-offs, and debt collection activities. Both types provide exemptions that allow you to keep certain assets, although exemption amounts vary. However, personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. Chapter 7 usually does not allow you to keep your home or property if your creditor has an unpaid mortgage or lien on it.

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