Bankruptcy, What Does It Do?

Some Chapters are more suitable for different needs, but bankruptcy, in short, offers assistance for debtors through the automatic stay on creditors’ actions following filing. The automatic stay means that any form of harassment that debtors may have seen in the past, including letters, phone calls along with other requests for payments, must stop. Consequently, if all the requirements of the court are reached in the genuine and open manner in accordance with full disclosure, several types of discharge can be utlized enabling the debtor to once again take up their lives or businesses once more.

Individuals weighted down by consumer debt, particularly credit card debt, can expect to have this debt wiped out as most credit card debt is unsecured. Debtors filing under chapter 7 are required to make their non-exempt assets obtainable for liquidation to secured creditors. The debtor has to offer payment or surrender the collateral. Unsecured creditors may not receive full payment or, indeed, any payment. The bankruptcy court appoints a trustee who puts together a meeting with creditors and deals with the disposal of assets to creditors based on their status. At the end of the process the debtor almost always receives a discharge; therefore the debtor is freed from the troublesome debt and in a position to start life afresh without anymore harassment by creditors.

Even though chapter 7 is a solution predicated on whiping out debt, additionally there is a provision for reaffirmation of a specific debt assuming the debtor can prove sufficient income. In cases like this the debtor makes arrangements with a creditor to hold on to certain property. Chapter 7 does not mean the loss of all assets, so household assets and exempt property can typically be retained.

Other approaches to bankruptcy look into reorganization rather than liquidation. These methods call for the formation of a repayment plan so that the debtor can hold onto property or a business following reorganization, and in some cases consolidation, of debt. Chapter 13 is a reorganization approach that is appropriate for individuals that have a steady income sufficient enough to hold on to their property and manage their mortgages given assistance and advice.

Again the debtor receives relief on filing because of the hold on creditor activity, and co-debtors will also be shielded from creditors. A repayment plan is created during debt counseling, although unsecured creditors may receive little or no repayments based on the debtor’s circumstances. After three to five years, the debtor will probably get a discharge of debts.

Family farmers and fisherman are offered chapter 12 a comparable method of managing debt but one which includes increased debt burdens such as those associated with operating these businesses.

Filing chapter 11 is a bankruptcy option that provides businesses with the an opportunity to remain in control and operate the business, in the long run, eliminating the debt burden. This option is most suitable for larger businesses as it is a complex, lengthy and potentially expensive business. But it is the option that provides the mechanisms businesses need. It provides for flexiblity in changing business environments where repayment plans can be modified.

Whether an individual or a business, under most cases discharge means that the debtor is free from debts in existence prior to filing the petition.

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