Our bankruptcy basics site is for those individuals that are considering filing for personal bankruptcy in the near future. First, we will try to provide you with a quick description of the basic types of personal bankruptcy on our featured entries. Second, we invite you to click on the link on the right side of this bankruptcy basics page that corresponds with the state in which you reside. On that page you will be provided with more information on filing for bankruptcy in that state.
Chapter 7 Bankruptcy
Chapter 7 of the United States Bankruptcy Code is the Bankruptcy Code’s “liquidation” chapter. Lawyers sometimes refer to it as a “straight bankruptcy.” It is used primarily by individuals who wish to free themselves of debt simply and inexpensively, but may also be used by businesses that wish to liquidate and terminate their business.
Upon the filing of the chapter 7 petition, an impartial case trustee is appointed by the United States trustee (or by the court in Alabama and North Carolina) to administer the case and liquidate the debtor’s nonexempt assets.
Chapter 13 Bankruptcy
Chapter 13 is designed for individuals with regular income who desire to pay their debts but are currently unable to do so. The purpose of chapter 13 is to enable financially distressed individual debtors, under court supervision and protection, to propose and carry out a repayment plan under which creditors are paid over an extended period of time.
Under this chapter, debtors are permitted to repay creditors, in full or in part, in installments over a three-year period, during which time creditors are prohibited from starting or continuing collection efforts. A plan providing for payments over more than three years must be “for cause” and be approved by the court. In no case may a plan provide for payments over a period longer than five years.
More details will be coming soon in our blog about bankruptcy.