Title 11 of the United States Code contains the Bankruptcy Code. It has been amended numerous times since its inception. The code permits a uniform federal law to regulate all bankruptcy proceedings. This means that it is generally irrelevant in which state a person files for bankruptcy because the regulations will be the same.
The Federal Rules of Bankruptcy Procedure govern the bankruptcy procedures. These regulations are frequently referred to as the ""Bankruptcy Rules."" These rules include a collection of official bankruptcy forms. The Code and Rules establish a formal legal procedure for handling the debts of individuals and companies.
The majority of the bankruptcy procedure is conducted outside of the courthouse. Typically, there is little time devoted in court. A debtor will typically not appear once the process has begun unless an objection is raised to a portion of the arrangement.
Chapter 7 bankruptcy is commonly referred to as Liquidation. It is a court-supervised, methodical process involving a trustee. The trustee assumes control of the estate's assets, converts them to cash, and distributes the cash to creditors. However, the debtor has the right to retain certain exempt properties and secured creditors' rights.
In most chapter 7 cases, there is little non-exempt property. There may be little actual liquidation of the debtor's assets as a result. These situations are known as """"no-asset instances"""".
A creditor with an unsecured claim will only receive funds from the bankruptcy estate if the case involves assets and the creditor has filed a proof of claim with the court.
In most chapter 7 cases, the debtor will receive immediate debt discharge.
Chapter 13 bankruptcy is referred to as Adjustment of Debts of a Person with a Regular Income. It is designed specifically for a debtor with a steady source of income, such as a job. It is also used for individuals who fail the means test for chapter 7 bankruptcy.
This form of bankruptcy is frequently preferred to chapter 7 because it allows a debtor to retain a valuable asset, such as a home, and because it permits a debtor to repay creditors gradually. The duration depends on income and other factors, but is typically between three and five years.
A chapter 13 debtor retains possession of the estate's property and makes payments to creditors, via the trustee, based on the debtor's expected income over the plan's duration. This form of bankruptcy does not permit immediate debt discharge. Instead, the debts are discharged upon completion of the plan's payment requirements.
While the plan is in effect, chapter 13 bankruptcy protects debtors from litigation, garnishments, and other creditor actions. Additionally, the discharge under chapter 13 is broader than under chapter 7.""
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