Filing for Personal Bankruptcy

Recently amended in Spring of 2005, the United states Congress initially enacted a Bankruptcy Code in 1978. The Bankruptcy Code provides relief to those who have gotten themselves heavily into detrimental debt, enables individual debtors to temporarily or permanently stop monthly payments for personal debt. In doing so, independent consumers or businesses may resort to either of the two basic forms of personal bankruptcy, the Chapter 7 Liquidation or ‘No Asset’ Bankruptcy and the Chapter 13 or the Income Adjustment Plan.

Listed below are two various types of bankruptcies

Most people almost immediately think of the Chapter 7 personal bankruptcy when considering filing for bankruptcy to solve their debts. Under this Chapter 7 ‘No Asset’ personal bankruptcy, the debtor is considered or is certified by the bankruptcy as an individual (consumer or business) who could not in any way pay any more of his debts, hence with no asset or means remaining to reimburse to his creditors. In this process, the court determines ability of the debtor to pay this debts by performing a ‘Means Test’, after which, the person’s debts are ‘liquidized’ or effectively wiped out by the court. At this point, the debtor is discharged, and clear from their debt.

Under Chapter 13 Bankruptcy on the other hand, an individual with a regular source of income, in contrast to those who have ‘no asset’, undergoes a rehabilitation or adjustment plan aiming to reduce the payment of debts into just a percentage of his liable amount outstanding. In this process, the individual works with a US bankruptcy trustee appointed by the court to set up the payment plan. The creditors are paid a lump sum of the debtor’s remaining disposable income assets. At which point, the debtor is relieved from further obligation on the debts while saving him from further law suits.

Although bankruptcy may save your from financial ruin, the civic community may know about your history. All bankruptcy files go to the public record, and credit bureaus keep the bankruptcy record for a period lasting at least a decade.

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