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Personal Bankruptcy- Which Is Right Ch 7 Or Ch 13 |
By:
Adrian Fletcher |
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Personal Bankruptcy- Which Is Right Ch 7 Or Ch 13
Adrian Fletcher
In the United States, bankruptcy laws are created and amended by the federal government. The Bankruptcy law courts are responsible for administering these laws. The aim of the courts is to mediate in a dispute where one person owes other people or businesses a sum of money. The courts will try to retrieve as much money as possible from the debtor and distribute it to the creditors. However it will do this in a manner that doesn't completely ruin the debtor and allows him/her to recover with prudent financial management. The estimate is that around a million people will go bankrupt the US this year. They will think about filing for bankruptcy if they cannot pay their debts. This article will discuss the options available to them if they want to file for personal bankruptcy.
Filing under chapter 7 personal bankruptcy
This is the most common way that people file for bankruptcy. Chapter 7 involves the bankruptcy court liquidating your assets and paying back your creditors. You are responsible for drawing up your list of assets. In most cases this does not include items such as your home or car. A trustee that is appointed by the court will be responsible for selling your assets and paying off your creditors. Chapter 7 costs around $300 for an administration fee. It can only be filed every seven years by one individual.
Filing For Chapter 13 Bankruptcy
Unlike chapter 7, chapter 13 bankruptcy does not cancel out your debt but it does allow you to keep all your assets. chapter 13 is a way to set up a payment plan and an agreement between debtor and creditors about how the debt will be paid off. This agreement is reached in the bankruptcy law courts. A trustee is assigned to the debtor by the courts. The trustee is responsible for drawing up the payment plan and ensuring that it is followed through. The debtor will give money to the trustee each month that will then be apportioned to the various creditors. The debt is only canceled out when all the outstanding debts have been paid but the aim of chapter 13 bankruptcy is to structure the payment plan so that the debtor can meet the conditions of the creditors without harassment.
Although both these forms of personal bankruptcy allows the debtor to discharge his/her debts there are some criteria that must be considered before going for each one. In the case of chapter 13, you cannot have a debt that exceeds two hundred fifty thousand dollars. This debt must be unsecured and any other debts that are secured should not be more than seven hundred and fifty thousand dollars. In chapter 7, personal assets are only exempt from liquidation in the following cases. Your home is exempt if you owe more than 80% of the value as a mortgage. Your car is exempt if it is worth less than $2,000.
The bottom line is that you know the rules and regulations of the various chapters well before ever filing for one or the other. It may be an idea to employ a lawyer versed in the bankruptcy laws who can advise you on the best option for your particular case.
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Article Source: http://www.statssheet.com/articles/article70814.html |
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