What is Bankruptcy?
Bankruptcy is a legal action to help people with debt problems. A person owing money can often get a court order that they no longer owe their debts (Chapter 7 bankruptcy) or they can get a court order that lets them pay their bills in whole or part over 5 years (Chapter 13 wage earner plan) while protecting them from their creditors.
Bankruptcy is a federal court process designed to help consumers and businesses eliminate their debts or repay them under the protection of the bankruptcy court. Bankruptcies can generally be described as “liquidations” or “reorganizations.” Chapter 7 bankruptcy is the liquidation variety — property is sold (liquidated) to pay off as much of your debt as possible, while leaving you with enough property to make a fresh start. Chapter 13 is the most common type of “reorganization” bankruptcy for consumers — you repay your debts over three to five years. Both kinds of bankruptcy have numerous rules — and exceptions to those rules — about what kinds of debts are covered, who can file, and what property you can and cannot keep. Bankruptcies, of any kind, stay on your credit report for 10 years. All decisions regarding bankruptcy should be considered very carefully and not taken lightly.
Bankruptcy is a proceeding in a federal court in which an insolvent debtor’s assets are liquidated and the debtor is relieved of further liability. There are four types of bankruptcy, Chapter 7 (liquidation for individuals and businesses), Chapter 13 (reorganization for individuals), Chapter 11 (reorganization for individuals and businesses), and Chapter 12 (reorganization reserved for individuals in the farming and fishing industries). Chapter 7 bankruptcy is when the court appoints a Trustee who may liquidate or sell some things that you own to pay your creditors. Most of your debt will be canceled, but you may choose to pay some creditors, usually to keep a car or home in which the creditor has a lien. Chapter 13 bankruptcy is when your debt is reorganized into a single monthly payment. The payment will continue for 36 to 60 months. In no case may a plan provide for payments over a period longer than five years. You do not have to repay all of your debt. You pay only as much as you
Bankruptcy is a legal procedure designed both to protect an individual or business that can’t meet its financial obligations and to protect the creditors involved. To begin the process, proper papers must be filed. There are specific chapters of the federal bankruptcy law. Proceedings under Chapter 7 (known as straight bankruptcy) involve taking most of the borrower’s property. The court appoints a trustee to sell off the assets and distribute the cash among the creditors. Proceedings under Chapter 13 (known as wage earner’s bankruptcy) involve the borrower proposing a plan for repaying a portion of the debt in installments from the borrower’s income. Chapter 11 of the federal Bankruptcy Act is generally used by corporations and not by consumer debtors. Its proceedings are expensive and complex. Consumer debtors normally use Chapter 7 or Chapter 13. Once the bankruptcy proceeding ends, the borrower is no longer liable. This occurs when the bankruptcy court enters a discharge order in a
Bankruptcy is a legal process provided by federal law which gives those who are experiencing financial difficulties an opportunity for a fresh start. It is provided for by Article I, Section 8, of the United States Constitution and is codified in Title 11 of the United States Code. Bankruptcy has its roots in the Old Testament Book of Deuteronomy (15:1-2) and Book of Nehemiah (10:31). The fundamental role of the bankruptcy laws was formally defined in a 1934 decision by the United States Supreme Court:”[I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” Local Loan Co. v. Hunt , 292 U.S. 234, 244 (1934). The “new opportunity and a clear field for future effort” is provided by the bankruptcy discharge which releases one from personal liability for certain debts and prohibits creditors from ever again taking any action to collect on those debts. There are six basi
