All the information, articles, and tools that you need when facing debt and bankruptcy!
Tuesday, January, 6th, 2009
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All the information, articles, and tools that you need when facing debt and bankruptcy! Tuesday, January, 6th, 2009 |
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Bankruptcy Explained Bankruptcy is a legal process allowing financially distressed parties to get rid of debt when there is no reasonable way of their repaying that debt. Generally, there are two types of bankruptcy proceedings that are the most commonly used by individuals. Those are Chapter 7 and Chapter 13.Chapter 7 Bankruptcy When an individual files for Chapter 7 protection, the court appoints a trustee who decides what portion of the debtor's property is "exempt" and what portion is "non-exempt". Bankruptcy exemptions vary from state to state but the usual exempt forms of property are the debtor's home, auto, and household goods. There are usually monetary limits to the value of each type of exempt property as set by the individual state. After it has been determined which property the debtor will be allowed to keep, the remaining non-exempt property is sold or liquidated. The proceeds of the sale are then used to pay off as much of the debtor's unsecured debt as possible. Unsecured debt is debt in which no form of collateral exists that the creditor could take to satisfy the debt. Exempt property will not be sold, but keep in mind that if a debtor owes money on a secured debt, the creditor does retain the right to repossess the property if the debtor is unable to make the payments. When all the funds from the sale of non-exempt property have been distributed to the filer's creditors, the remainder of the debt is discharged by the bankruptcy court. The debtor is no longer responsible to repay what remains of his unsecured debt and is free to start to rebuild his life and recover from the bankruptcy.. Chapter 13 Bankruptcy Filing for Chapter 13 bankruptcy is similar debt management. In Chapter 13, the debtor must work out a plan in which he can make payments to all creditors for a period of three to five years. The constant threat of repossession or foreclosure is removed. The debtor does not always have to repay the whole debt and other agreements can be made. The Bankruptcy court does require that the debtor have sufficient income to cover the terms of his repayment plan as well as basic living expenses for the duration. At the end of the three to five year plan, the debtors remaining debt is discharged. Before making the decision to file for Bankruptcy protection, or the decision of which type to file, it is always best to discuss the alternatives with qualified legal help. Bankruptcy is a serious undertaking and should not be pursued lightly.  |
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