A tidal wave of debt has hit and Americans are trying to keep their heads above water. This search for a lifeboat often leads to questions about bankruptcy, and who it is right for. Certain situations greatly benefit from the protection offered by the bankruptcy code.
Chapter 7 Bankruptcy
This is the bankruptcy chapter most commonly filed. Chapter 7 debtors are deemed as incapable of repaying their creditors, as their necessary monthly expenses leave behind only a minimum of excess funds. The bankruptcy petition and schedules are then assigned to a trustee who conducts a careful evaluation to make sure a Chapter 7 is the right fit.
Assets
Assets are belongings, big or small, and together they make up a bankruptcy estate. Be it a home with equity or an old radio, the bankruptcy court needs to know about it and its value; this is especially important in a Chapter 7 bankruptcy. Assets of value, not secured by a loan, may be sold by the Trustee in an effort to distribute payments to creditors. While this fact is discouraging to many potential Chapter 7 debtors, it does not mean that all valuable assets will be liquidated. Each bankruptcy debtor is entitled to a certain dollar amount in exemptions which are applied to their assets. The trustee can only sell an item that has value after the exemption amounts are applied. The exemption amounts applicable to each debtor are determined by state law.
Discharge of Debtor
Once a bankruptcy has either been determined as a non-asset case or a case where no assets will be liquidated, the debtor will receive a court ordering all debts discharged. Non-asset cases will generally be discharged in around ninety days. An asset case will not be discharged until the assets are sold and funds are dispersed to creditors.
Chapter 13 Bankruptcy
While a list of assets are still required in the bankruptcy schedules, assets are not liquidated in a Chapter 13 case, making it much more attractive to those who own extensive valuables. In a Chapter 13 bankruptcy a repayment plan is set up under the protection of the bankruptcy code for those who have substantial income exceeding their necessary monthly expenses. In a Chapter 13 bankruptcy, a plan is filed along with the bankruptcy schedules and a petition, specifying how much each qualifying creditor will be repaid based upon the funds available. A monthly payment is paid directly to the trustee who apportions the assigned amount to creditors.
Due to the repayment plan, a Chapter 13 bankruptcy will last through the duration of the plan. Once the final payment is made, a discharge will follow.
Drowning in debt does not have to mean an untimely death, lifelines are out there. While bankruptcy may not be for everyone, it can be a great benefit to those who need it. Knowing the facts and having an attorney to help guide through the process, will assure the best outcome possible for all.
