Definition of Bankruptcy
Bankruptcy is a legal procedure that allows you to get a fresh financial start if you find yourself unable to pay your bills and can meet certain requirements. The right to declare Bankruptcy is provided in the Federal Bankruptcy law, and all Bankruptcy cases are processed in Federal Court. When one enters a Bankruptcy petition, immediately for all creditors try to collect debts while the Court has access to your financial situation and determines if the Bankruptcy relief can be granted in your case.
Chapter 7 Bankruptcy
The Chapter 7 Bankruptcy is part of the United States Bankruptcy Code that deals with a settlement, which means the sale of all assets that are not exempt from a court-appointed trustee. Creditors will be paid from the proceeds of the sale. In return, a debtor receives a discharge, which releases a debtor from all downloadable debts and orders creditors to stop forever their attempts to collect the debts unloaded.
When a debt is discharged, a debtor is forever released from the obligation to pay that debt. Not all debts are downloadable, it includes certain taxes, maintenance or child support, student loans, debts that are not listed in the Chapter 7 petition, and debts that have been incurred by defrauding or misleading a creditor.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is the part of the United States Bankruptcy Code that is designed primarily for residential homeowners and allows a married person or couple to pay everything, or a portion, of their debts under the supervision and US Bankruptcy Court Protection
Chapter 13 Bankruptcy is designed for workers, with steady incomes, who are bombarded with accounts, judgments and other financial concerns. A Chapter 13 plan is primarily used to compensate for mortgage arrears, and a percentage, or all of the money due to your other creditors, during a 3-5 year period. Chapter 13 can also be used as an alternative to credit counseling where an individual can offset their credit card debt over a period of 3-5 years without the accumulation of charges in view of additional interests.
While a Chapter 13 Bankruptcy case is in effect, creditors can not begin or continue their collection efforts and must accept what the plan pays them. Any individual or married couple, even if independent, can receive relief from Chapter 13 if they owe less than $ 250,000.00 in unsecured debt and less than $ 750,000.00 in secured debt.
Upon successful completion of a Chapter 13 reimbursement plan, the debtor receives a discharge and a certificate of termination, which extinguishes all obligations to make other payments on unsecured debts, even though these creditors are not paid in full. In fact, many people in Chapter 13 Bankruptcy only pay their unsecured creditors no more than 10, 20 or 30 percent of the total amount owed.