What Does It Mean to File For Bankruptcy?

When someone reaches the point of filing for bankruptcy they have typically endured a period of embarrassing financial, and perhaps emotional and physical, losses. Often people filing for bankruptcy are ashamed of the place where they have found themselves and they struggle to keep paying and to find help, although they are embarrassed to do so.

It’s important to know that while bankruptcy is often a humiliating point to come to financially, it is not a judgment on you as a person. It simply means that you are at a point where you can no longer continue on your current financial path.

Filing for bankruptcy is a legal proceeding where you are officially declaring that you do not have sufficient money to repay your outstanding loans and expenses. People have a lot of questions and misconceptions about bankruptcy, such as “If I file for bankruptcy, will I automatically lose my house or be foreclosed on?” “Will I ever be able to buy a home or qualify for financing any purchase again?” “Can’t I just transfer property to my spouse/sibling/children and avoid bankruptcy?”

Let’s start by taking a look at the two most common forms of personal bankruptcies to file: Chapter 7 and Chapter 13.