Some people who need to seek bankruptcy protection will file for Chapter 7. This is known as liquidation bankruptcy because your nonexempt assets will be handed over to the bankruptcy trustee and liquidated with the proceeds going to pay your creditors. If there are balances left on any of your accounts after this, those will be forgiven when the case is discharged.
When you want to file this type of bankruptcy, you have to pass a means test. You can't have assets or income that is above a certain level. If you can't pass the means test, you will have to explore the possibility of filing Chapter 13 bankruptcy.
A Chapter 7 bankruptcy is usually resolved in three to six months. This swift resolution works for a lot of filers because they are ready to put the whole situation behind them. But just because the case is resolved doesn't mean that you are done with the effects of the filing.
When you file a Chapter 7 bankruptcy, it will likely impact your credit for 10 years. This doesn't mean that you won't be able to get credit. It means that you likely won't qualify for the very good rates on the credit you do obtain. This can lead to you paying more for the credit you do have.
As part of your bankruptcy filing, you will have to go through credit counseling. During this process, you will learn how to budget your money. This skill can help you as you make a plan for using your money and credit wisely after your bankruptcy is discharged.