In a Chapter 7 bankruptcy, individuals can wipe out many types of unsecured debt. Unsecured debt is debt that you do not have to put up collateral for, such as a debt incurred from a credit card, or medical bills. The Chapter 7 bankruptcy filing process takes about four to six months, and costs about $1500. Before you can file for Chapter 7 bankruptcy, you must go through credit counseling with an agency approved by the Untied States Trustee, and complete a debtor education course. While you are allowed to keep some of your assets, other assets are sold by the interim trustee to repay some of your creditors. The interim trustee is an individual appointed by the United States Trustee, and many times will oversee the entire bankruptcy process.
It is important to know that not all debt is discharged under Chapter 7 bankruptcy. Mortgages typically survive bankruptcy, as do car payments. This means that while you will not be forced to sell your home when you file for Chapter 7, it may still be foreclosed on. Child support, spousal support, back taxes that are less than three years old, and any judgments from a court are generally not discharged either. Student loans may be discharged, but only if the debtor is able to show extreme hardship, which is difficult to prove.