If you are one of the many people who cannot pay your bills and see no end in sight to a growing, rather than shrinking, mound of debt, you may wonder if filing for bankruptcy could help you. In evaluating this option, it is important to know how a bankruptcy really works. The most common form of consumer bankruptcy is the Chapter 7 plan.

As explained by Experian, allowable debts are completely discharged through a Chapter 7 bankruptcy. Some debts not able to be part of a Chapter 7 plan include spousal or child support. A Chapter 7 bankruptcy may often be completed in just a few months and may work well for you if most of your debts are unsecured meaning they are not associated with any collateral items, like a mortgage is with a home.

When assessing your eligibility for a Chapter 7 bankruptcy, the courts will review your current debts and assets. You will be allowed to keep some assets up to a stated value. These items are referred to as exempt. Any non-exempt assets may be seized and sold to repay some of your debt. Joint bankruptcy filers may have higher exemption levels than single bankruptcy filers. You will also need to pass a means test to prove that your income level is within the stated range to qualify for Chapter 7 relief.

This information is not intended to provide legal advice but is instead meant to help people struggling with severe debt understand how a Chapter 7 consumer bankruptcy works so they may determine if filing for bankruptcy is the right option for their situation.