A Quick Guide To Bankruptcy Procedures
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.
While there are some similarities in the types of debt that can be discharged through either Chapter 7 or 13, there will be some differences as well depending on the state where you file. Most unsecred debt, garnishments, foreclosure notices and collection calls can be discharged through bankruptcy. However, child support, alimony, fines, certain taxes and student loans cannot.
Chapter 7 is a straight liquidation. Chapter 13 is a pay back plan. However, unless your plan satisfies all of your debt over the term of the bankruptcy, the Court usually will not allow the debtor to keep property like a boat, time share, recreational vehicles and the like. These items must be sold to meet the requirement to pay all the debt within the scheduled time.
As part of the new law, persons seeking to file under either chapter have to have attended a government approved credit counseling course within six months of filing. The idea here is to try and solve the credit problem without taking legal action. The second major change just involves Chapter 7. Today you have to satisfy a "means test" to confirm your income does not exceed a certain amount. This amount will vary by state. You can find those limits here.
There are other strategies to settle your debt without going through bankruptcy. It all depends on your personal situation and what best makes sense for you and your family. Any decision to file for bankruptcy should not be made without consulting a qualified bankruptcy attorney. - 16931
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.
While there are some similarities in the types of debt that can be discharged through either Chapter 7 or 13, there will be some differences as well depending on the state where you file. Most unsecred debt, garnishments, foreclosure notices and collection calls can be discharged through bankruptcy. However, child support, alimony, fines, certain taxes and student loans cannot.
Chapter 7 is a straight liquidation. Chapter 13 is a pay back plan. However, unless your plan satisfies all of your debt over the term of the bankruptcy, the Court usually will not allow the debtor to keep property like a boat, time share, recreational vehicles and the like. These items must be sold to meet the requirement to pay all the debt within the scheduled time.
As part of the new law, persons seeking to file under either chapter have to have attended a government approved credit counseling course within six months of filing. The idea here is to try and solve the credit problem without taking legal action. The second major change just involves Chapter 7. Today you have to satisfy a "means test" to confirm your income does not exceed a certain amount. This amount will vary by state. You can find those limits here.
There are other strategies to settle your debt without going through bankruptcy. It all depends on your personal situation and what best makes sense for you and your family. Any decision to file for bankruptcy should not be made without consulting a qualified bankruptcy attorney. - 16931
About the Author:
Chris A Smith follows the personal credit industry and reports on credit card law, credit reporting agencies, personal bankruptcy, credit repair, alternative banking products and more. To find more details on bankruptcy and alternative plans, go to the informative credit site CreditFix
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