Bankruptcy is a legal status granted by a court declaring that a person is unable to repay their debts. Bankruptcy law in the United States is governed under Federal law. Specifically, bankruptcy laws found in title 11 of the United States Code. The individual kinds of bankruptcy are named after the chapter in which they are found in Title 11. Two of the most common types of bankruptcy are Chapter 7 and Chapter 13. While many people have heard of these, they may not understand the difference Chapter 7 and Chapter 13 bankruptcy can make.
Chapter 7, also called liquidation, is the most common type of bankruptcy. In a Chapter 7 bankruptcy, the court appoints a trustee to collect all of the non exempt property from the debtor, and auction it off in order to satisfy the outstanding debts. If there is not enough property that can be sold to satisfy all of the debts, then the case is what is known as a “no assets” case. If this is the case, then the creditors are forced to relinquish their claim on the debtor without receiving full payment for the debt.
Chapter 13, also known as reorganization, involves a court working with a debtor and any creditors to reorganize any outstanding debts so that the debtor can realistically pay it off. In contrast to Chapter 7, which allows a debtor to immediately extinguish a debt, Chapter 13 is designed to allow the creditor to still receive full payment of a debt. Typically, a court tries to make sure that a creditor is paid in full within three to five years of the bankruptcy proceeding.
Unfortunately, almost 1.25 million Americans will file for bankruptcy this year. Thankfully, this is down from the 1.38 million Americans who filed last year. If you are thinking of filling for bankruptcy, then you should seek the advice of bankruptcy law attorneys. They can provide you with all of the bankruptcy tips and advice you will need to make an informed choice. They can also explain the difference Chapter 7 and Chapter 13 bankruptcy can make for you. To learn more, search online. Read more.