Bankruptcy is governed by U.S. federal law and is an established manner in which people or businesses can deal with outstanding debt. Some distinctions apply but basically there are two types of bankruptcy available to the average citizen – chapter 7 and chapter 13.
Chapter 7 involves the liquidation of the debtor’s assets. He will be required to relinquish everything to the hands of the bankruptcy trustee who will be in charge of distributing the funds to the debtor’s creditors. Holdings may be sold to cover the amount owed. There are certain exemptions however.
The rules for exemptions can vary from state to state or the debtor can depend on standard federal regulation. Either way he will be allowed to keep personal assets such as clothing and vehicles unless they are of exceptional worth. The actual value of any property owned by the debtor is evaluated by the trustee as to whether or not it is worth selling off. If a property is mortgaged for instance, it is only worth what is left after the loan is paid in full.
Chapter 13 bankruptcy is preferred by people who want to keep their non-exempt property. While chapter 7 resolves debt through liquidation Chapter 13 allows for a repayment plan over a time span of from 3 to 5 years. Before being granted a chapter 13 bankruptcy the debtor must complete a course in credit counseling. He will also be asked to present the court with a list of assets and liabilities along with a calculation of income and expenses.
Because of the intricacies involved in the process, anyone thinking of filing for bankruptcy should first consult with an experienced attorney. Without the guidance of someone familiar with the terms and responsibilities, getting through the bankruptcy court system can be daunting. Parker Lawyers can offer 30 of years of professional advice to their clients dealing with bankruptcy issues today. Call the offices @ 303-841-9525.
