Under Chapter 11, the debtor must repay some debts and receives discharge on some debts.Īccording to the Administrative Office of the U.S.
Chapter 13 (Adjustment of debts of an individual with regular income) - for debtors with regular income who wish to hold on to valuable assets, such as a house.In this case, the debtor turns to Chapter 13. Chapter 7 is not available to debtors with income exceeding certain thresholds. Chapter 7 (Liquidation) - a trustee cashes in the debtor's assets and distributes the cash to creditors in an orderly fashion.Personal bankruptcies are available in three types, or "chapters": According to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, debtors must document their efforts to receive credit counseling and must meet certain state-based income tests. However, debtors must attend a formal meeting of creditors - known as a "341 meeting" - supervised by a court trustee.
A debtor petitions the federal district bankruptcy court for a "discharge," or removal, of debts, although the debtor seldom has to appear in court. You declare bankruptcy in court with the assistance of a lawyer who has the required expertise.Ī primary goal of bankruptcy laws is to give debtors a financial fresh start.
It's a last resort, since it goes on your credit report for 10 years, reduces your credit score and cuts your access to credit. Bankruptcy is a legal proceeding available to folks who can't find another way to pay their bills and satisfy their creditors.
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