What Does Bankruptcy Include? 


Bankruptcy is a process in which a court liquidates your assets and gives the proceeds to creditors to settle debts. The court may also permit you to keep certain key assets considered “exempt” from the sale. 

It temporarily stops foreclosure, repossession and collection efforts by creditors. However, it will remain on your credit report for years and make it difficult to get loans. 


In a Chapter 7 bankruptcy (the most common type for individuals) the trustee liquidates your nonexempt property and distributes the proceeds to creditors. The trustee may also reclaim any property that was securing a debt, such as an automobile or home mortgage. Secured debts that would otherwise be discharged can generally be retained if you agree to reaffirm them, which you do with the help of an attorney. 

You will be expected to disclose all assets and accounts. Failure to do so can be interpreted as fraud and subject you to criminal penalties. 

Some types of debt are not dischargeable in bankruptcy, including back child support and alimony obligations, court fees, some tax debts and most student loans. If you are thinking of filing for bankruptcy, you should consult with an experienced attorney or financial advisor. The law is complex and can have long-term impact on your credit. If you cannot afford to pay your debts, consider a consumer proposal instead of bankruptcy. 


For individuals who can afford to pay some of their debt, bankruptcy provides a way to eliminate the rest through Chapter 7. This process is often referred to as liquidation or straight bankruptcy. It converts all nonexempt property into cash and distributes proceeds to creditors according to the Bankruptcy Code’s priority rules. unsecured creditors, such as credit card companies, receive the balance of the funds after exempt property, secured creditors (such as mortgages or car loans), and administrative claims (such as the trustee’s fee and wages claimed by employees). 

A bankruptcy filing automatically stops most lawsuits, evictions, foreclosures, repossessions, wage garnishments, and debt collection. However, if you have equity in your home, bankruptcy may not be the best solution for you. Instead, consider a consumer proposal to keep your home and eliminate debt. If you need help deciding what option is right for you, book an appointment for a free consultation today. 


The bankruptcy laws provide for several types of bankruptcies, based on the financial circumstances of the debtor. Reorganization bankruptcies typically allow entities like businesses and individuals to restructure their debt, while keeping certain assets.

Chapter 11 allows a business to remain in operation while reorganizing its affairs and repaying debts over time. A plan of reorganization must be proposed, creditors whose rights are affected must vote on it and the court must approve it. The plan must classify and specify claims by the creditor, and how, when and in what amounts those claims will be paid. 

Individuals can also file for reorganization under Chapter 13 of the Bankruptcy Code, which is often called wage earner bankruptcy. It provides an opportunity for a debtor to reorganize his or her financial affairs and pay back debts over time, with the ability to keep some personal assets like household furniture, tools of the trade and cars up to a specific value. 


In bankruptcy, liquidation means the conversion of assets into cash. This is done by selling them or distributing them to creditors and shareholders, if there are any. It occurs when a company is insolvent and can no longer pay its debts. 

If you file for Chapter 7 bankruptcy, the court will usually sell your assets to pay some or all of your debts. However, you can usually keep your home, a motor vehicle up to a certain value and personal possessions like furniture or appliances. In a bankruptcy, the court will generally discharge all your unsecured debts, such as credit cards, payday loans and medical bills. However, back alimony and child support obligations, most student loan debt and federal tax liens will survive a bankruptcy. 

Bankruptcy has serious consequences and will affect your ability to get credit, travel abroad or gain some types of employment. It will also stay on your credit report for seven to 10 years. You may want to consider other formal options, such as a consumer proposal or debt consolidation, instead.

These are just a few of the examples of what bankruptcy can entail. Be sure to seek advice from an expert. In Harrisburg pa bankruptcy lawyers can answer questions and assist you with the entire process. 

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