Personal Bankruptcy

According to the US constitution, you could relieve your debts partly or fully if you fail to meet your obligations to your creditors. There are two major types of personal Bankruptcy which can be applied to the consumers. These are Chapter 7 Bankruptcy and Chapter 13 bankruptcy.

What is Chapter 7 Bankruptcy?

All or some part of your debt are discharged under Chapter 7 Bankruptcy, when you use your liquid assets to repay some of your debt.

What is Liquid Asset?

You can make your liquid asset from your possessions. Your checking and savings accounts can quickly be converted into cash. Courts distribute your liquid assets among your creditors as a partial repayment. These are the type of assets which can not be used for the repayment to your creditors. These type of assets are called non-exempt assets. Your state recognizes which liquid assets come under exempt and which come under non-exempt. After that you neither will be liable for any discharge from debt any more nor your creditors will have the right to collect those debts from you.

How would you qualify?

You have to pass a means test where you will have to prove that your income is less than the required income for your family size in your state. If you pass, you will qualify but if you fail then you won’t be able to file Chapter 7. Then you can rather file Chapter 13. There you must get a credit counseling from any approved credit counseling agency.

What is Chapter 13 Bankruptcy?

According to Chapter 13 plan, you have to repay your debt totally or partly through a 3 - 5 year plan. While making the bankruptcy filing you also need to submit a repayment plan to the court. when you submit the plan, you need to start making payments to the court, then court will pay the amount to your creditors. After a few weeks, there would be a hearing in the court to approve the plans of your payment. Once your plan gets approved, you can start making payments to the court. Once you complete your chapter 13 repayment plan, you won’t be liable for any discharged debts any more.

Why would you file Personal Bankruptcy?

Personal bankruptcy laws are too complex. So it is better to have an advise from a bankruptcy attorney before you file for the bankruptcy. And this is the best way because they would settle your paper work accurately and completely