Chapter 7 is the most common chapter of the bankruptcy code and is also known as a standard bankruptcy. Under this chapter of the bankruptcy code, a debtor is required to surrender all non-exempt property. Exempt property is property that a bankrupt individual may retain. Each state has its own exemptions, so you should consult with a bankruptcy attorney about the exemptions applicable to your state. Under chapter 7, a debtor will hand over all of their non-exempt property to their bankruptcy attorney, who will then sell the property for as much as possible to pay off the debtor's creditors. On a document known as the statement of financial affairs, a person must list all of their debts and financial obligations that they wish to eliminate. Any debts not listed on this form will not be discharged in the bankruptcy, so it is crucial that this form be filled out accurately and completely.
A person should not disregard any debts out of embarrassment or because they do not want their attorney to know about them. Inclusion of fictitious debts is deemed bankruptcy fraud and is a serious offense. It is in a person's best interest to fill out this form accurately and completely. A person will be required to take a course in financial management and adhere to the plan devised by their attorneys. The individual will be discharged from bankruptcy and released from all debts and financial obligations after a state-specific period of time. Typically, an individual has few or no assets to transfer, making this chapter the most desirable and prevalent.
Chapter 13 bankruptcy is also referred to as a reorganization bankruptcy. This chapter of the bankruptcy code is advantageous for individuals with non-exempt property that they do not wish to surrender to their bankruptcy attorney. This chapter is also desirable for individuals who believe paying off their debts is the """"right thing"""" to do, as under this chapter an individual will pay as much additional to their bankruptcy attorney for a certain period of time, typically 3 to 5 years. Instead of turning over non-exempt property, an individual will work with their bankruptcy attorney to reorganize their debts and devise a plan for extra money they can pay back to creditors over a period of time, typically between three and five years. Instead of selling an individual's non-exempt property to pay off their creditors, the bankruptcy attorney will work with the individual to determine how much of their income above the state-mandated minimum standard of living can be paid to creditors.
Once a person has filed for bankruptcy, the bankruptcy will remain on their credit report for seven years, so it is imperative that they heed the advice of their bankruptcy attorney. A bankruptcy will negatively impact your credit score, but it represents a new financial beginning for individuals who are hopelessly submerged in debts they cannot repay. Once a person has registered for bankruptcy, they are able to start over with no debts and a healthy financial future. After a person files for bankruptcy, any additional assets they acquire are entirely theirs and are not included in the bankruptcy case.
There are numerous variations of the bankruptcy code chapters for each state, so it is imperative that a person consult with a bankruptcy attorney before deciding which chapter is appropriate for them and which chapter they will file bankruptcy under.
Please visit the following link for more information on bankruptcy chapters and state exemptions.
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