How Does Bankruptcy Work?
Bankruptcy is a way to relieve consumers who are suffering with an enormous amount of overwhelming debt. It allows the consumer to be released from their debts either completely or partially. A bankruptcy remains on the consumer's credit file for 10 years.
Bankruptcy is a matter of federal law. If the federal bankruptcy law is in disagreement with state law, the federal bankruptcy law overrides the state law.
There are various types of bankruptcy methods: Chapter 7, Chapter 11, Chapter 12 and Chapter 13.
A Chapter 7 bankruptcy is the most frequent type of bankruptcy filed by many consumers. It is a liquidation arrangement, where all debts are wiped out completely. This form of bankruptcy is available to individuals, married couples, those in partnerships and corporations.
A Chapter 11 bankruptcy gives business owners an opportunity to reorganize their debts. The debtor's claims of creditors are either paid entirely or partially by the debtor. The purpose of reorganizing is to restructure the debt so that the debtor can function better with the debts.
A Chapter 12 bankruptcy is a more simplified reorganization structure. his form of bankruptcy is for family farmers whose debts meet specific debt restrictions.
A Chapter 13 bankruptcy is a debt repayment plan available to individuals and married couples who have debts that fall within a specific statutory amount. Chapter 13 allows debtors to repay either some or all of their debts from their projected future income over a 3 to 5 year period.
In regard to a bankruptcy estate, the estate is considered to be all of the equitable and lawful interests that the debtor possesses from the origination of the case. The debtor is allowed to claim exemption for specific property; however, the remaining balance of the estate is liquidated in a Chapter 7 bankruptcy with the purpose of paying all of the administrative costs of the proceeding as well as the claims of the creditors according to their priority.
All forms of bankruptcy must be approved by the court, and the agreements are binding upon all parties involved.
