Bankruptcy is a process, which allows a consumer or a business who no longer can pay their debts to get a fresh start by either liquidating their assets to pay their liabilities or by creating a more feasible repayment plan under Court Protection.
All bankruptcy cases are handled in federal courts under rules outlined in the U.S. Bankruptcy Code.
There are two general types of bankruptcies:
1) Liquidation Bankruptcy, which is also known as Chapter 7 Bankruptcy
2) Reorganization Bankruptcy, which itself has several types. However, Chapter 13 Bankruptcy is most commonly used type by consumers
What is Chapter 7 Bankruptcy?
In Chapter 7 bankruptcy, a trustee may sell or liquidate some of the Bankrupt person's property to pay back some or all of his or her debt. However, some properties are protected under state laws; thus they are exempt from liquidation.
What is Chapter 13 Bankruptcy?
In Chapter 13 bankruptcy, which is also known as “Wage Earner” the bankrupt party can keep all his or her properties, but must show to have a reliable source of income to make monthly payments over a period of time set by the court, which is generally between three to five years to repay all or some of the debt.
Please note that both Chapter 7 and Chapter 13 bankruptcies have many rules regarding the types of debts covered; who can file for bankruptcy; and which type of properties are exempt from bankruptcy? The information here is just a general overview of Bankruptcy and NOT Legal Advice.
Do I need a Lawyer to file for bankruptcy?
Similar to almost all fields of law, you have the right to Pro Se or Self-Representation. In other words, the law does not mandate that you hire a bankruptcy lawyer. However, like any other field of law self-representation could be a risky proposition.
The Laws and Procedures of Bankruptcy laws are highly complex and convoluted. A simple mistake such as forgetting to list an asset or missing a deadline to file a document could prompt the court to dismiss your case. Thus you will lose the court protection and creditors can seize your qualified assets unimpeded.
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