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The two main types of bankruptcy are Chapter 7 and Chapter 13. Filing for Chapter 7 bankruptcy can be described as liquidation. When you file, the bankruptcy court orders an “automatic stay”, which temporarily allows the person or business to not pay off any debts and the creditors to not be able to collect until the order is dropped. At this time, if necessary, then liquidation can begin and it is possible that the individual could have to sell their house or other values in order to pay off the debts. Chapter 13, on the other hand, is a strategy used by people that are not completely in over their heads...
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