Bankruptcy laws in the US are set by the federal government and administered in the Bankruptcy law courts. The purpose of the laws is to reach an equitable agreement between the person filing for bankruptcy and those that are owed money. The laws try to get as much of the money that is owed to the creditor without making it impossible for the debtor. It is thought that nearly one million people will go bankrupt this year in the United States. They will consider filing for bankruptcy. This article will cover the ways they can go if they decide to file for personal bankruptcy.
Filing under chapter 7 personal bankruptcy
Chapter 7 bankruptcy is the most well understood form of personal bankruptcy law. The aim of chapter 7 is to liquidate your assets with the help of a court appointed trustee. The money derived from the sales will be used to pay off creditors. The process involves drawing up a list of assets by the individual that in filing for bankruptcy. This list will be used by the trustee. In many cases personal items like a home and car will be exempt from this list. Chapter 7 costs around 0 for a filing fee. It can only be used once every seven years by the individual in question.
Filing Chapter 13 Personal Bankruptcy
Unlike chapter 7, chapter 13 bankruptcy does not cancel out your debt but it does allow you to keep all your assets. chapter 13 is a way to set up a payment plan and an agreement between debtor and creditors about how the debt will be paid off. This agreement is reached in the bankruptcy law courts. A trustee is assigned to the debtor by the courts. The trustee is responsible for drawing up the payment plan and ensuring that it is followed through. The debtor will give money to the trustee each month that will then be apportioned to the various creditors. The debt is only canceled out when all the outstanding debts have been paid but the aim of chapter 13 bankruptcy is to structure the payment plan so that the debtor can meet the conditions of the creditors without harassment.
Both of these types of bankruptcy will result in you removing your debt. One is quicker than the other but has longer lasting repercussions to your credit history. Each has some criteria that are worth understanding before deciding if it is right for you. Chapter 7 for instance, does not exempt personal items from liquidation unless they are of a certain value. For instance, your home is not exempt unless you owe 80% of the mortgage. Your car is not exempt unless it's value is less than 00. In chapter 13, your unsecured debt must not be more than two hundred fifty thousand dollars. Your secured debt cannot be more than seven hundred and fifty thousand dollars.
Ultimately, you need to understand the laws and the repercussions of filing for each chapter before ever going ahead with the process. Many people use a bankruptcy lawyer who will be up to date with the laws and advise you on which chapter suits your needs best.
