| A Quick Guide To Bankruptcy Procedures |
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| Written by Chris A Smith |
| Wednesday, 01 July 2009 12:35 |
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In the US there are essentially two ways to go through a personal bankruptcy. These two proceedings are known as Chapter 7 and Chapter 13 Bankruptcy and they are significantly different from each other.
In the US there are essentially two ways to go through a personal bankruptcy. These two proceedings are known as Chapter 7 and Chapter 13 Bankruptcy and they are significantly different from each other. Prior to October of 2005, going through a personal bankruptcy was a fairly simple and painless process. It did ruin your credit but it also allowed for a more liberal discharging of debt. In 2005, the law changed and is designed to provide an incentive to people to file under Chapter 13 rather than Chapter 7. For people with a steady income, Chapter 13 allows them to keep some property like a house or a car that they would otherwise lose in a Chapter 7 filing. Chapter 13 is a court approved "pay back" plan that can run for as long as five years. If a person opts for Chapter 7 they are essentially agreeing to liquidate all of their belongings and property, with the exception of work related tools and some basic household goods, to pay back the debtors. This is called a straight bankruptcy. To insure that the debtor does not profit from this discharge of debt, the law puts a restriction on how much the debtor can earn while the bankruptcy proceeds. Once you have filed for Chapter 7, you will not be able to file again for eight years. Chapter 13 on the other hand, has a waiting period of only two years between filings. Both Chapter 7 and Chapter 13 can eliminate unsecured debt, stop foreclosure proceedings, and halt collection processes. The differences lies in the way that those debts are discharged. Some debts such as alimony, child support, student loans and some taxes are exempt from the bankruptcy proceedings and cannot be eliminated. Unless you have an acceptable plan to satisfy your debt under Chapter 13, the court usually will not allow you to keep property when the creditor has security lien on it. This could include your home as well as well as boats, vacation homes, recreational vehicles etc. In the past, bankruptcies clogged the courts as they were easy to get. Today the law tries to slow that processdown by requiring all persons desiring to file bankruptcy, to attend a government appoved counseling course regarding personal finance and credit. This requirement was added in the hopes that the debt problemcould be resolved outside the court. In addition, persons wanting to file Chapter 7 now have to have the approval of the Court regarding their income. If the Court feels that an individual's income is too high, they will not let them walk away from the debt through liquidation. The decision to file for bankruptcy can be a very emotional one and one that can cause a great deal of friction within a family. Don't make the stress greater by trying to do it yourself. Seek out a qualified bankruptcy attorney to guide you throught the process. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Chris A Smith follows the consumer finance industry and reports on credit card issues, credit reporting firms, consumer bankruptcy, credit repair, alternative banking products and more. To find more details on bankruptcy and alternative plans, go to the informative credit site CreditFix |