Part of a successful bankruptcy filing is having at least a working knowledge of how it works. This means reading up on it even before take the first step. Here are some of the questions a debtor has to know before deciding to file for bankruptcy.

Filling bankruptcy What is bankruptcy for?

The main purpose of a bankruptcy is to protect a debtor from harassment, solicitation, or legal actions by their creditors. Once a person is in bankruptcy, creditors are put under automatic stay, which keeps them from contacting the debtor. Another purpose of bankruptcy filing is to relieve a person of some or all of his debt and give him a fresh start, although the discharge can vary between Chapter 7 and Chapter 13 bankruptcy.

Will I lose everything in a bankruptcy?

If you’re filing for Chapter 13 bankruptcy, then your assets are safe from your creditors’ hands. Chapter 13 simply puts you in a repayment plan, unlike a Chapter 7 bankruptcy which allows a trustee to sell your assets. In this case, you can declare some of your assets as exempt so that they’re not considered part of your bankruptcy estate. Each state has its rules on which properties can be exempted in a bankruptcy filing.

What is the BAPCPA?

BAPCPA stands for the Bankruptcy Abuse Prevention and Foreclosure Prevention Act. This is a law passed in 2005 that changed the rules governing bankruptcy. One of the biggest changes is the introduction of the means test, which checks a person’s income to determine whether they should file for Chapter 7 or Chapter 13 bankruptcy.

What are the other bankruptcy chapters for?

Consumers are mostly concerned with Chapter 7 and Chapter 13 bankruptcy because they are the ones that apply to individuals. Other chapters exist for businesses and government entities. Chapter 11 bankruptcy is similar to Chapter 7, but has a larger debt limit and allows the debtor to stay in business while getting back on track. Chapter 12 bankruptcy is similar to Chapter 13 but is specific to family farms, while Chapter 9 bankruptcy is for government entities such as cities.

Will a bankruptcy filing affect my family?

A bankruptcy can affect a debtor’s family members if they have joint possessions or assets, such as bank accounts, homes, or other personal property. In the case of Chapter 7 bankruptcy, these assets can be sold to pay creditors and cover the administration costs of bankruptcy. Debtors have the option to indemnify, or “hold harmless,” their spouses or other family members in a bankruptcy so they do not have to pay debts that were incurred jointly.