Bankruptcy comes in a couple forms, and each one varies. Finding the right type of bankruptcy for your situation is important, because each one has different implications and can result in you keeping or losing particular assets. Your attorney can help you determine the right type of bankruptcy for your case, but to better understand them, here are some commonly asked questions.
What kinds of bankruptcy are there?
There are three main kinds of bankruptcy. The first is Chapter 7, which is liquidation bankruptcy. The second is Chapter 11, which is a reorganization bankruptcy that normally gets used by small businesses and some individuals. Chapter 13 bankruptcies are reorganization plans as well, but they're paid back over the course of around three to five years.
Does Chapter 7 bankruptcy result in the loss of all your assets?
No, and that's a misconception that leads many people to avoid it at all costs. The fact is that Chapter 7 bankruptcy will result in you selling off some items, but there are exemptions for a single vehicle, a certain value for your home and more. There are also ways to resign for debts, so you can continue with some while trying to discharge or pay off others.
It's important to realize that the only assets that can be liquidized are those that will result in cash coming in to pay off your creditors. If something isn't likely to result in a cash sale, that item won't necessarily be sold or leave your possession. Your attorney has lists of exemptions that can help you better understand your position in a bankruptcy arrangement.
Source: Ohio Bar, "Bankruptcy," accessed Feb. 19, 2016