Commonly referred to as insolvency, bankruptcy is the legal status of an individual or institution that is unable to pay its debts as they become due.
Located in Title 11 of the United States Code, the Bankruptcy Code specifies the following six categories of bankruptcy:
· Chapter 12
Chapter 7 vs. Chapter 13
Chapter 7 and Chapter 13 are the most common forms of personal bankruptcy. Almost 65% of all U.S. consumer bankruptcy filings are under Chapter 7.
Chapter 7 bankruptcy is often referred to as liquidation or plain bankruptcy. Under Chapter 7, a trustee can collect all of the debtor's non-exempt assets, sell them, and then distribute the proceeds to the creditors. However, this does not imply that filing for Chapter 7 bankruptcy is equivalent to losing all of your assets.
Non-exempt is the important term here. The exemptions granted by state law to a debtor consist of assets and valuables the trustee is not permitted to acquire and sell. The majority of the time, a Chapter 7 debtor is permitted to retain all of his or her assets while having all of his or her debts discharged.
A Chapter 7 bankruptcy will remain on a credit report for ten years from the date the petition was filed. A person who has filed for Chapter 7 protection and received a discharge within the past eight years is ineligible to do so again.
Chapter 13 bankruptcy, on the other hand, entails the reorganization of an individual's debts, in which his income is used to pay his future expenses and a portion of his prior debts. This form of bankruptcy is only available to debtors with a regular income sufficient to cover their current expenses and a portion of their outstanding debts.
If a debtor has a regular income and, after paying all regular and necessary expenses, has at least $167.00 left over, he or she must file Chapter 13 in order to seek protection from creditors. A typical Chapter 13 requires a 60-month payment plan.
Under Chapter 13, a debtor is permitted to keep all of his property, but the bankruptcy court must authorize an interest-free plan for repayment of unsecured debts within thirty to forty-five days of the case's initiation. In addition, while the Chapter 13 bankruptcy is still pending, the debtor is not permitted to obtain additional credit without the court's permission.
In contrast to Chapter 7, Chapter 13 bankruptcy remains on a debtor's credit report for only seven years and allows the discharge of unsecured portions of a secured debt. In addition, Chapter 13 can stop home foreclosures and enable the debtor to attempt debt reorganization without having to make all past-due payments at once.
When filing for bankruptcy, there are a variety of options to consider before making a final decision. The burden associated with having to make these crucial decisions can be alleviated with the assistance of a highly qualified bankruptcy attorney. Contacting a reputable bankruptcy attorney should be your first step when considering your options.
For more information on Chapter 7 and Chapter 13 bankruptcy, speak with a bankruptcy attorney who has experience in bankruptcy law and protecting clients' assets. The Law Office of Kevin J. Pratt is constituted of committed Georgia bankruptcy attorneys who place the client's needs first.""
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