There's two types of bankruptcies; there's the chapter 7 bankruptcy which gives you a fresh start, and the chapter 13 which allows you to pay back a portion of your debt, sometimes 100 percent, sometimes as low as 10 percent, within three to five years.
In most cases, people prefer chapter seven bankruptcy. Basically chapter seven allows you to get rid of all your unsecured debt, that's most of the time credit card, loans that were given out without getting a lien on anything, medical bills. Now, some things that actually do not go away in chapter seven are taxes that you owe the government and that were owed within the last three years, tickets such as parking tickets, those don't go away, lawsuits that were filed against you for injury that was caused from drunk driving, and domestic support, child support also doesn't go away.
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Another thing that stays after chapter seven bankruptcy are liens that are on your property. So if there's a lien on your house and you choose to keep your house and not surrender it, you actually still have to pay those liens on the house, and any other assets such as a car that you want to reaffirm and keep after the bankruptcy you still have to pay that secured debt on those loans.
What you can keep In chapter seven you can keep your house even though there's a lien on it. All you have to do is just keep making those payments on the house, and the same goes for a car that you want to keep. You can just keep making those payments and make a reaffirmation agreement, which is basically a contract saying that I will keep on being obligated for the payments on the car even after the bankruptcy. Now, you do have the option of surrendering the house and the car. If your mortgage is much more than the value of the house, you might want to actually choose to surrender your house since you can buy a similar kind of house for less value later on down the years. But for some people, even though the mortgage may be more than the value of the house, they still choose to keep their old house, because it's their own house and they have been living in it for some time.
Same goes for the car, you might owe much more for the car than the true value of the vehicle, you might want to actually choose to surrender it instead of reaffirming it and being obligated to making those payments even after bankruptcy. Sometimes, bankruptcy can give debtors a way out of bad deals that they might have gotten themselves in prior to filing the bankruptcy.
Debtor also has one more option he can call the financing company where the loan was taken out, and negotiating with them. Debtor or the debtor's lawyer should inform the creditor that the debtor is willing to reaffirm on the debt for a smaller balance on the debt.
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