What is bankruptcy?

Bankruptcy is a legal process that helps people who are unable to pay their debts get out from under them. It involves either liquidating assets to pay off creditors or reorganizing debt so that monthly payments can be made. In Washington, a person can file for bankruptcy under either Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. Chapter 7 involves liquidation of some non-exempt assets to pay off creditors. Unsecured debts, such as credit card debt and medical bills, can be discharged and no longer owed. Chapter 13 involves restructuring debt so that a person can make monthly payments instead of the entire debt being due all at once. When someone files for bankruptcy in Washington, they must go through credit counseling and provide the court with detailed financial information. The court will then decide if the debts can be discharged or if the debt must be restructured. No matter which type of bankruptcy is filed, the procedure helps people get a fresh start and avoid the financial stress of crippling debt. Although bankruptcy can have a negative effect on a person’s credit score, it is an important tool to help people get out of debt and back on the path to financial stability.

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What is bankruptcy?

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