What is a bankruptcy?

By Mary Guimont                                                                                                                                                                   

Bankruptcy

 Bankruptcy is when a person or entity can no longer pay their creditors. They take a legal action in court to gain relief from their debt which is called bankruptcy.

A person in debt, may have liens on their property from creditors. Their wage garnished by a collection agency. When a debtor files bankrupt this immediately prevents the lein from taking place and stops the garnishment on their income.

Difference Between Chapter 7 and Chapter 13

When a person files bankrupt. They ether file Chapter 7 or Chapter 13.

Chapter 7

Chapter 7 is when all assets that are not considered exempt are to be liquidated of and the proceeds are to go towards the debtor's debt. All insecure debt is erased. Secure debt is ether seized or what is owed is negated by the debtor to the creditor and decided by the judge as to what is fair

Helpful website for information about Chapter 7

Chapter 13

Chapter 13 is when the debtor asks the court to give them more time to pay off their debt to the creditors This prevents seizure of property and garnishment of future income. In Bankruptcy Court, the judge usually gives the debtor, 3 to 5 years.

Free information and help with Chapter 13

Advantages of Chapter 13 over Chapter 7

Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on "consumer debts." This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection.



Other Websites We Have That Might be Helpful:

Can a Collection Agency garnish Federal Benefits

Statue of Limitations for Old Debt

Dispute a debt