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Personal Bankruptcy Chapter 7

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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 Ch7

Filing chapter 7 personal bankruptcy is the most common form of personal bankruptcy. Essentially it is a court arranged way to liquidate your assets and use this money to service your debts. The process involves drawing up a list of personal assets that a court appointed trustee will sell off. The court will then distribute the money from this process to all the creditors. Chapter 7 bankruptcy costs approximately $300 for a filing fee. It can be filed once every 7 years by the individual.

Filing Chapter 13

Chapter 13 differs from chapter 7 in that it does not aim to clear a person from their debts but merely to set up a structure so that they can pay off the debts free from being harassed by creditors. The courts will help the debtor and creditors reach an agreement about how the debtor will pay off his/her debts. This will be some form of payment plan that will last for so many years and be a sum of money each month. The debtor will give this money to a court appointed trustee who will then give the money to the creditors. In this way the debtor will not have to liquidate their assets but work towards paying off the debts over a period of time.

Although both these types of personal bankruptcy will eventually clear your debts there are some things to consider before filing for one or the other. Chapter 7 will be a quick way of removing this debt but it will also give you a bad credit history and make it harder to recover from bankruptcy. Some personal assets that may be exempt from liquidation, like your home and car need to meet a specific criteria before they are eligible. You must owe 80% of the mortgage on the home. The car must be valued at less than $2000. In chapter 13, it will take longer to remove the debt but you will not lose any assets. However, the debt you will be paying off has to match the following criteria. You can't have a unsecured debt in excess of two hundred fifty thousand dollars. You can't have a secured debt that is more than seven hundred and fifty thousand dollars.

The bottom line is that you know the rules and regulations of the various chapters well before ever filing for one or the other. It may be an idea to employ a lawyer versed in the bankruptcy laws who can advise you on the best option for your particular case.

Personal Bankruptcy Chapter 7

There are two types of bankruptcy petitions you can file: Chapter 7 and Chapter 13. Each type has a different purpose with a different outcome. Which type of bankruptcy you should file is dependant on your personal financial situation.

A Chapter 7 bankruptcy petition is meant for people whose debts far exceed their assets and would have extreme difficulty ever settling their current debts. This type of bankruptcy would result in the liquidation of all assets, aside from those that merit exemption. All proceeds from liquidation would then be split among the creditors you owe. In return, you are discharged from all applicable debts. Once Chapter 7 bankruptcy is filed, your creditors must cease and desist from all lawsuits, wage garnishings, phone calls and letters related to your debts.

Bankruptcy law is not intended to leave you destitute, and should you file a Chapter 7 bankruptcy petition, you are entitled to retain certain limited assets. These include $18,450 worth of equity in your home, vehicles worth less than $1500, and most clothing, furnishings and household goods.

There are some debts which will not be discharged with the filing of a Chapter 7 bankruptcy petition. These include current or past child support and alimony payments, most student loans, recent tax bills or any debts where the owed creditors can prove your financial dishonesty in the past.

Your Chapter 7 bankruptcy petition may be denied if a judge deems you fit to pay, in which case you may re-file a Chapter 13 bankruptcy petition. A Chapter 13 does not discharge you of your debts, but rather reorganizes them through the enactment of a court ordered repayment schedule where you repay your creditors over a period of three to five years.

Chapter 13 bankruptcy is the preferred option for people who wish to retain control of their assets and/or have a reliable and prolonged source of income.

Before making the decision to declare bankruptcy, it is important to consider any co-debtors, such as those who have co-signed for loans with you. If they do not co-declare bankruptcy with you, your creditors will go after them to settle outstanding debts even if you yourself have been discharged of those debts.

Whichever bankruptcy petition you file, declaring bankruptcy will do damage to your credit rating. However, most people who declare bankruptcy already have extremely poor credit ratings, so it is unlikely that bankruptcy will make them much worse. Given that bankruptcy can give you a fresh financial start and allow you to rebuild your credit, it may even help your credit rating over the long term.

Before making the major decision to declare bankruptcy, it is also prudent to consult with a lawyer, credit counselor or financial advisor to ensure you're doing what's best for your financial future.

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Both Adrian Fletcher & Robert Michael are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Adrian Fletcher has sinced written about articles on various topics from Information Technology, Cure Anxiety and Home Improvement. Learn and obtaining. Adrian Fletcher's top article generates over 27100 views. to your Favourites.

Robert Michael has sinced written about articles on various topics from Marketing, Banking and Real Estate. Robert Michael is a writer for which is an excellent place to find bankruptcy links, resources and articles. For more information go to:. Robert Michael's top article generates over 49500 views. to your Favourites.

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