Consumers should avoid filing for personal bankruptcy at all costs, as it is a major financial decision that results in a bad credit history and can stay in your records for up to 10 years. However, bankruptcy does happen, and individuals who live with only the bare necessities can file for Chapter 7 bankruptcy.
The Chapter 7 code focuses on the liquidation of assets. This is the correct code for consumers who do not own a lot of property other than furniture and clothing and, after paying monthly bills, do not have much money left over.
Those who are filing for this chapter will have much of their unsecured debt forgiven, if not all. It is a fairly fast process that will take a few months to be complete, disallowing any creditors from contacting you about these accounts in the future.
To file for Chapter 7 bankruptcy protection, one must past the “means test,” which determines whether you are eligible for government assistance. Debtors must also complete a session with a credit counselor.