Under Chapter 7, a liquidation bankruptcy, the debtor is excused from most debts in return for giving up his or her property to creditors. However, since the law also allows the debtors to keep basic property, such as a car or personal property if not too expensive, most debtors, if they have proper planning, will keep most, if not all, they already own. For debtors with significant property, Chapter 13, a debt readjustment, is an option. Under Chapter 13, the debtor works out a plan that is affordable to pay back debt. This choice is useful for persons who are behind in payments but have property they would like to keep and otherwise would lose in Chapter 7.
Bankruptcy is also helpful in giving debtors time to work out solutions.
Upon filing, the bankruptcy halts all debt enforcement actions such as foreclosures on a home, repossessions of an automobile, or garnishments of wages or bank accounts. The bankruptcy will be on your credit report for ten years. However, you are not banned from borrowing. The bankruptcy is only one factor in determining credit-worthiness. Most lenders look at a person's present ability to re-pay.