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What is bankruptcy?

Authored By: Central Virginia Legal Aid Society, Inc. LSC Funded

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This week’s legal term of the week is “Bankruptcy.”  Bankruptcy means you ask the court to excuse you from your duty to repay your creditors.  Bankruptcy allows you to discharge, or get rid of, most of your debts, but also keep a certain amount of property.  Any property you can’t protect is sold and the money is used to pay your creditors. There are two kinds of bankruptcy for people not engaged in business - Chapter 7 and Chapter 13. Under a Chapter 7, you may not have to repay any of your debts before they are discharged.  Under a Chapter 13, you must repay your debts – at least in part – before they are discharged.

Last Review and Update: May 10, 2012