Bankruptcy (Chapter 7 vs 13).

In plain English

Bankruptcy is the legal reset button, and the chapter determines the mechanics. Chapter 7 (liquidation) discharges most unsecured debt (cards, medical, personal loans) in roughly 3 to 6 months; eligibility runs through a means test, and non-exempt assets can be sold, though exemptions protect basics for most filers. Chapter 13 (reorganization) builds a court-supervised repayment plan from your disposable income for 3 to 5 years, and is the route for people with income above the means test or assets to protect, including a home behind on its mortgage. Neither discharges most student loans, recent taxes, or child support. The credit report carries Chapter 7 for 10 years, Chapter 13 for 7.

01Why it matters

Bankruptcy exists because the alternative (decades of garnishments and collections on unpayable debt) serves no one. Knowing the two chapters' shapes turns a shame-loaded word back into what it is: a legal tool with specific costs and specific protections.

02The math, step by step

$45,000 of medical and card debt on a $38,000 income with no major assets: Chapter 7 likely discharges it within months. The same debt with a house 4 payments behind: Chapter 13 can fold the arrears into a 5-year plan and stop the foreclosure.

03What this is NOT

04Receipts

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