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Chapter 5. Coping with a Credit Crisis > The Type of Bankruptcy You File Matter...

The Type of Bankruptcy You File Matters

The majority of people who file for bankruptcy opt for Chapter 7, which wipes out most unsecured debts. (Unsecured debts are those that aren't linked to specific property, such as a car or a house. So your mortgage is a secured debt; your credit card bills are unsecured.)

Filing a Chapter 7 bankruptcy can mean you have to give up some of your assets (property or cash) to pay your creditors. In reality, most Chapter 7 filers aren't required to give up anything, either because they don't have any assets or because the property they have is “exempt” or protected from creditors. The exemptions vary by state, but they might include household furnishings, clothing, tools you need for work, retirement accounts, and some—or all—of the equity in your home.


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