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Filing for Chapter 7 bankruptcy triggers an automatic stay that forbids businesses from collecting on your debt, or suing you. A court-appointed trustee will review your financial information and possibly sell some of your unprotected assets to pay creditors. Usually the debts are discharged, even if the sale proceeds do not cover the amount you owe.

The tradeoff is Chapter 7 bankruptcy puts a big dent in your FICO credit score, usually for 10 years, making loans or decent interest rates difficult to obtain.

The federal bankruptcy code protects certain assets, though most states force the filer to use the state’s allowance schedule, and those can vary. You might be able to keep your home if you’re current on your mortgage or can catch up, depending on your state’s homestead exemption level. If you have too much equity in property, however, you might need to file Chapter 13 bankruptcy to keep your home.

Some creditors will require you to reaffirm your loan, which means agreeing to make payments and exclude the debt from your bankruptcy. In exchange, the lender pledges not to repossess the property.

If you earn more than your state’s median income level, you’ll have to pass a means test to ensure you truly can’t pay the debts. And you can’t file for Chapter 7 if you’ve previously filed for one in the past eight years.

Sole proprietorships that meet the requirements can take advantage of Chapter 7, but things can get tricky. The trustee can choose to sell non-exempt property, even if it’s used for business purposes.

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