Thursday, 3 October 2019

Chapters 7 and 13 Bankruptcies Explained

Chapters 7 and 13 bankruptcies Explained

Bankruptcy is not available in every country but they have it in the U.S. Bankruptcy is a separate section of federal law that provides for a fresh start. That is the genesis of it, that is where it all comes from. If you run into trouble and get buried financially whether a person or a company or some types of government units, then you can seek relief under the bankruptcy code.

It was enacted by Congress, it's been modified several times and it's still available for those who need its protection.

There are two kinds that an individual can primarily use, chapter 7 and chapter 13. 

What that refers to is a section of bankruptcy code. There is an actual chapter 7 and chapter 13.

Bankruptcy is a process, in a chapter bankruptcy the person has to fulfill a means test, examining their income and their expenses based upon a cost of living adjustments that are available in their community. These are fairly new standards that were enacted by Congress.

Read: How To Prepare To File Chapter 7 Bankruptcy

But in general, if you have more debts than you can pay, you may be eligible for bankruptcy. Taking into account not just your income but also your assets. You do not need an attorney to file bankruptcy as an individual but it is highly recommended, this is a very specific area of law and it is very tricky for people who are not familiar with reading code, etc.

  • There will be attorneys fees involved necessarily, "you might say well, that doesn't make any sense, I can't pay my bills, how can I pay an attorney"? well, it may be more beneficial to you to save the money to pay this attorney if you have lots of creditors coming after you.

A person is compelled to file a bankruptcy primarily because their creditors are waiting for payment, are tired of waiting for payment and are now suing them. 

Creditors have certain right against you, to come after you to pay the money that you owe, for a bank, on a house loan, a car loan, a credit card loan, etc. And if you have multiple people coming after you, you have all kinds of troubles and it would probably help you to conceal these consult with the bankruptcy attorney.

If you are eligible for chapter 7, 

  1. Then you will disclose all of your assets, 
  2. All of your liability
  3. All of your income
  4. All of your expenses

There is a filing fee that is set by the courts and you will be arranged for your payment to your attorney.

The process is that you will meet with your attorney, you will fill out all the information, make sure that you are eligible, you will sign declaration swearing that this information is correct.

Then the case will be filed. From the date that it's filed, there is an automatic stay imposed that stops anyone who is pursuing you, it immediately stops. 
  • Creditors still have different avenues to still try to impose their remedies and right on you but it's a different way, so, you get a breather. 

Then there will be a creditors meeting, it's called a section 341 meeting, all the creditors can come in and ask questions about your schedules because they will see your assets income, etc. Your declaration of what assets you want to keep, what assets you are going to give back, they will be able to come to the creditor's meeting, there is one in every bankruptcy case and ask you questions under oath about the schedules.

Then there may be some other actions related to the bankruptcy. but if you truly have more debts and you otherwise qualify, the trustee will then look over things there is a trustee appointed for the court and for the benefit of other creditors to see that things are done appropriately and to see if there are any assets available for the creditors to use to satisfy their debts. He or she is a separate person that is in charge of that.

After the trustee gives the clearance then there is a discharge ultimately which is what you want in chapter 7. But then you have an actual decree from a court with regard to the creditor that you put on your list. Except for student loans, taxes and certain other things, not everything is dischargeable.

But for ordinary debt that you are responsible for, if you qualify then you will ultimately receive a discharge which means those debts are gone.

If you come into some money later and you want to pay somebody back that is your decision, but you are not required to and they cannot enforce it against you unless they have taken some other separate action.

You get a discharge and then you can start again, it's called giving you a fresh start, you can take advantage of this every 7 years. 

Chapter 13 bankruptcy

The other option for an individual that they may want to take advantage of or may have to, depending upon their assets and their income is chapter 13.

This is a restructuring, again there is a trustee, again there is schedules and information that is completed. The trustee here does the same job as the chapter 7 trustee but in a little different way. 

In chapter 13, you are going to be repaying certain creditors based upon your level of income through the trustee office over a period of time. But again at the conclusion of the plan, you would again receive a discharge. 

I hope that gives you some preliminary information. 

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