What is Bankruptcy?

A bankruptcy is a legal process by which a person who can not pay their obligations may be relieved from payment of some or all of their debts and get a fresh start. The right to file for bankruptcy in the United States and its territories is provided in the law passed by Congress in 2005 known as the Law on Bankruptcy Abuse Prevention and Consumer Protection (“Bankruptcy Abuse Prevention and Consumer Protection Act) . All bankruptcy cases are handled in bankruptcy courts that operate as units within the federal courts. The filing of a bankruptcy case immediately stops collection efforts by creditors.

What can bankruptcy do for you?

• A bankruptcy can relieve you of your legal obligation to pay all or most of its debts, is what is known as the relay. The purpose is to allow a fresh start.

• A bankruptcy can stop foreclosure on your home and give you a chance to pay the arrears. It does not eliminate your mortgage or other charges as such but it gives the opportunity to pay its arrears to within five (5) years.

• A bankruptcy can prevent repossession of your car or other property, or even compel the creditor to return property repossessed.

• A bankruptcy can stop the garnishment of wages, harassment and other practices of debt collectors, can restore or prevent termination of services such as water, electricity, phone, and can afford to defend claims that you do not accept debit, you can protect your co-debtors while you are in the process of bankruptcy.

• A bankruptcy can not solve all your financial problems and is not necessarily the right solution for all individuals.

• A bankruptcy can not eliminate certain rights of secured creditors or guaranteed. These creditors are those with a mortgage, lien or any property collateral such as home mortgages and car loans. A bankruptcy can force these creditors to obtain payment through the bankruptcy process but can not eliminate its obligation to pay because the property may lose warranty if not paid. A bankruptcy is not allowed to retain the property as collateral unless you continue with the payments.

• A bankruptcy is not going to relieve certain debts which the law provides special treatment such as alimony, certain debts related to divorce, many student loans, court-ordered restitution, fines in criminal cases and some contributions . A bankruptcy may protect co-debtors while the debt is paid in the bankruptcy because to do so and obtain a release of a cosigner debt could this be responsible for all or part of the debt. You may pay your co-signer then what you paid for it when their economic situation permits.

• A bankruptcy will protect only the debts that they have at the time of filing the bankruptcy will not get relief from debts incurred after filing bankruptcy.

Different types of bankruptcy

There are several different types of bankruptcy (about 99% of bankruptcy cases are under Chapters 7 and 13):

• Chapter 7 is known as ’settlement’. In fact in about 95% of cases there is nothing to be liquidated by the effect of the exemptions. Its purpose is liquidation of the debtor’s nonexempt property and pay debts far reaching. Can be used by corporations and partnerships as well as individuals.

• Chapter 11 is known as “reorganization” is used by businesses and some individuals with a high volume of debt.

• Chapter 12 is reserved for farmers and fishermen. The main source of income must be from farming or fishing.

• Chapter 13 is called “debt adjustment.” Required to file a repayment plan to pay all or part of the debt. Only for individuals with regular income, not to corporations or partnerships.

Chapters 7 and 13 can be filed by an individual, and if married, can the two is together. If your income exceeds the median income for a family the size of your family in your jurisdiction or state, must file a Chapter 13. Requires completion of a review of their financial means (“means test”) with detailed information about your income and expenses. If, pursuant to the “standards” of bankruptcy law you have the ability to pay at least part of their unsecured creditors, the bankruptcy court may decide that you can not file a Chapter 7, unless there are special circumstances.