Yes, though the process is not as simple as it sounds, nonetheless it is possible to get rid of debts by filing for bankruptcy. Though bankruptcy is just one of the few common methods to get rid of your debts, hundreds of thousands of people file for bankruptcy each year.

Before you go and file for bankruptcy, take advice, and understand whether this is the best option for you or not. Since however successful or popular this method is for getting rid of your debts, you must ensure that this is the best-suited option for your case. The next step would be to check whether you fall under the criterion of filing for bankruptcy or not?

Many Bankruptcy firms provide a free legal evaluation to help you check your eligibility to file for bankruptcy. However, once you file for bankruptcy, the same will be displayed against your credit Reports making it utmost difficult for you to get fresh loans or other credits to purchase a house or a car.
Once you have ascertained that bankruptcy is your best alternative to get rid of your debts, you need to understand under which Chapter you must file for…! If your average household income is less than the state median, then you need to file for bankruptcy under Chapter 7. However, if your household income is higher than the average state median then you must file for bankruptcy under chapter 13.

If you pass the means test (eligibility criterion), you will become eligible to file for bankruptcy under chapter 7. Under this chapter, you will not be required to pay your creditors a single penny. However, all your non-exempted property will be liquidated and the funds retrieved will be used to pay off your creditors. This entire process takes about 4-6 months after which you will get the bankruptcy discharge.

In case, your household average income is more than the state median, you will be required to file for bankruptcy under this chapter. Unlike chapter 7, in this Chapter, you will be devising a Repayment plan (based on your income) to pay off the creditors within a period of 3-5 years. This entire process takes around 3-5 years during you will be paying off your creditors in part every month as decided. Any unsecured debts which are still left off by the end of 5 years will be discharged.

As per the common saying, “Bankruptcy helps you get rid of all your debts” does not stand true. Only the unsecured debts like your credit card bills, medical bills, unpaid utilities will be discharged if you file for bankruptcy. You secured debts like – car loans, home loans are not discharged. These will be paid off to the creditors by exercising their lien rights– foreclosure of the property.

Filing for bankruptcy also has another benefit. It will help you get relief from the constant creditor harassment calls or other collection methods.

This is a common misbelief. Filing for bankruptcy is not equivalent to losing your assets. On the contrary, filing for bankruptcy is seen as a fresh financial start for many individuals. Therefore, the state and federal Governments provide several exemptions to help protect your property and assets from foreclosure.

These exemptions are ascertained with a fixed monetary limit and vary between states to state. You can use these exemptions to protect your car, home, disability benefits, tools, luxury assets wages, retirement accounts, etc.