The Bankruptcy Laws in the United States of America consists of various chapters. These chapters have been designed, keeping in mind the different situations of bankruptcy. In some cases, the bankruptcy court may decide to liquidate all the assets and properties of the debtor, in order to pay off the debts he or she owes to the various creditors. In some other cases, the court may decide the debtor to continue with its business operations and pay off the debts as per a fixed monthly repayment schedule. Likewise, in some cases, the debtor is an individual. In some other cases, it is an organization. The different chapters of the bankruptcy laws describe the various situations of bankruptcy.
Chapter 7 Bankruptcy Code
The chapter 7 bankruptcy code is the most common type of bankruptcy. The bankruptcy laws under this chapter, declare the debtor as bankrupt and all his or her assets and properties are sold off under the trustee appointed by the bankruptcy court. The money, thus relieved is then distributed among the creditors to settle their claims on the basis of the priority level, if any. This way, the chapter 7 is a good option for those debtors, who have lost all hopes to get their finances managed and pay off the debts.
Chapter 13 Bankruptcy
The chapter 13 of the bankruptcy laws allows the debtor to continue with its business operations and the court suggests them a repayment schedule to pay off the claims of the various creditors. The greatest advantage for the debtors here is that they also get a chance to get the creditors claims reduced to an amount that the debtor is comfortable to pay off. For example, the debtor may request the court that he or she is capable to pay off only 75 cents on each dollar. In most cases, the court approves such request with a little modification. It means, the court may approve to reduce the claim by 25% of requested for 75%. This way, the chapter 13 bankruptcy is a good option for those, who still have the hope to get their finances back on track if given an opportunity and some time.
However, here, it is important for you to understand that with the introduction of the new bankruptcy laws, since October 2005, the various chapters of the bankruptcy laws are no more optional. Now, it has become mandatory for the debtors to pass a means test and go through a credit counseling service before filing bankruptcy. It is the means test and the result of the credit counseling on the basis of which, the bankruptcy court will decide which chapter of the bankruptcy code works best for the debtor.
Bankruptcy laws are complicated laws and things have become more complicated with the introduction of the new bankruptcy laws, some two years back. Before filing for chapter 13 bankruptcy or chapter 7 bankruptcy, it is important for you to understand the ins and outs of the same.
Chapter 7 Bankruptcy Forms
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