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What is bankruptcy? Bankruptcy is legal process of discharging or reorganizing your debts. Technically speaking, bankruptcy is the status of a business or person that does not have the funds to pay back its debts. And that is okay. That is why bankruptcy law exists. The term bankruptcy has roots back to when banks failed and quite literally can be traced back to banks be described as broken, or unable to continue being a bank.
The filing for bankruptcy protection under Chapter 7 of the bankruptcy code is the most common form of bankruptcy. In this chapter the goal is to obtain a complete discharge or no longer have the legal obligation to repay eligible debts. In most of these cases California’s generous exemptions protect all of the filer’s assets. In these no asset cases all eligible unsecured debts are discharged and the legal obligation to pay the debt no longer exists.
You may still keep your house or your car when filing a chapter 7 bankruptcy case. If you are current with the payments and can afford to make the monthly mortgage payment or car payment, then you can keep them. A home mortgage payment or car payment are secured debts, if you do not pay the loan company will seek to foreclose on the home or repossess the car. So to keep these things, keep paying them and you will keep them.
There are a number of reasons why filing under chapter 13 could be the best course of action. These days the most common reason is because of problems with mortgage payments and the ability to get rid of an underwater second mortgage or equity line of credit. Chapter 13 bankruptcy is a powerful tool to reorganize and get rid of unsecured debts.