 TITLE: How Does Filing Bankruptcy Affect Your Credit? CONTENT: For individuals, bankruptcy is a legal proceeding involving a borrower and their creditors. The process will have you formally declare that you cannot meet your debt obligations and can allow you to obtain relief from some or all of your current debts. Bankruptcy should be considered only as a last resort after you've exhausted all other options, including debt consolidation and a debt management plan (more on that later).\nBankruptcy is complex, so you'll want to hire an attorney to help you through the process. Depending on your situation, you may file one of two types of bankruptcy: Chapter 7 or Chapter 13.\n### Chapter 7 Bankruptcy\nThis form of bankruptcy provides borrowers with a clean slate, so to speak. A court trustee will supervise the sale of certain assets—some may be exempt, such as cars and basic household furnishings—and give the proceeds to your lenders.\nThe remainder of what you owe will be eliminated upon discharge of the bankruptcy, which is a legal order releasing you from the debts covered under the proceeding. In other words, you'll no longer be obligated to make payments.\nSince Chapter 7 bankruptcy wipes out your debt, it may seem like an appealing option. But you'll need to undergo a means test to determine whether you're eligible, and you can lose important assets if you choose this route.\n### Chapter 13 Bankruptcy\nInstead of providing a clean slate like Chapter 7, a Chapter 13 bankruptcy can reorganize your debts in a way to make them more affordable. You'll typically get on a three- or five-year plan, during which you'll repay some or all of what you owe.\nOnce you've completed the repayment plan, your bankruptcy will be discharged. While this option may not be as appealing to some, it may be a good idea in the long run if you can manage it. END