1. Most people get to keep everything
People who file Chapter 7 bankruptcy (the type that gets rid of their debts quickly), overwhelmingly (97+%) keep all of their assets. Yes, Chapter 7 is called a "liquidation" proceeding, but most people keep everything because of "exemptions" (protections) allowed in bankruptcy.
2. High-income people can file bankruptcy
They may need to file Chapter 13 and pay something to the bankruptcy trustee (who pays their creditors) each month for five years, but often they pay only a small percentage of what they owe.
3. Once filed, all creditor actions cease
Once someone files a bankruptcy, an "automatic stay" immediately prevents all creditor actions against them, and stops any that have started, including lawsuits and foreclosures. How long are creditor actions stopped; that's for a qualified bankruptcy lawyer to determine.
4. Many taxes can be discharged
If income taxes are "old enough", they can be discharged in bankruptcy. What does "old enough" mean? See a bankruptcy lawyer for that. However, trust fund payroll taxes are not dischargeable (really, only employers would have those).
5. Marital support can't be discharged
Family support, child support, maintenance, or alimony is not dischargeable in bankruptcy.
6. Failed business corporations often have no good reason to file bankruptcy
– A corporation that files a Chapter 7 does not get a discharge of debts. The bankruptcy trustee liquidates the assets of the corporation and gives the proceeds to the corporation creditors.
– The bankruptcy trustee would look through the entity’s records, looking for loans made to insiders or preferential transfers that could be recovered.
– Often it's better to just shut down the corporation. Instructions for dissolution are on the website of the California Secretary of State.
7. Bankruptcy can increase credit score
Sometimes, because the debt-to-income ratio improves after bankruptcy, the person's credit score quickly increases.
8. Bankruptcy is a specialty
The revised bankruptcy laws of 2005 made bankruptcy much more complex. Filing without a bankruptcy lawyer, including a lawyer who is not experienced in it (possibly helping a friend), presents the danger of having the case dismissed or, worse, losing valuable assets.