Bankruptcy Bliss

There are several different Chapters available to an individual or business that finds themself overwhelmed financially. For each different Chapter, 7,9,11,12,13,or 15 there are a specific set of rules and guidelines one must follow or the petition for bankruptcy will be denied. Whether you are looking to payoff or wipe out your debts, there is an option availale for you.

Types of Bankruptcy

There are several types of bankruptcy, each is addressed in a separate chapter of the federal Bankruptcy Code.Chapter 7 and chapter 13 are the two types which are available for individual consumers. Chapter 9 involves bankruptcies filed by cities and towns. Chapter 12 deals with the special cases of family farmers. Chapter 11, Also called reorganization, is used primarily by commercial businesses that are restricting or liquidating while containing operations. While an individual not engaged in business may file for chapter 11 bankruptcy, such proceedings are expensive and complex.

Proceeding’s under chapter 7 involve the borrower surrendering most of his or her nonexempt assets (if any) and distributing them to the creditors or proceeds from liquidating (selling) them. However, some assets are exempt depending upon specific federal law.

The purpose of filing a chapter 7 case is to obtain a discharge of your existing debts. If, however, you are found to have committed certain kinds of improper conduct described in the Bankruptcy Code, the court may deny your discharge and, if it does, the purpose for which you filed the bankruptcy petition will be defeated.

Even if you receive a general discharge, some particular debts are not discharged under the law. Therefore, you may still be responsible for most taxes and student loans; debts incurred to pay non-dischargeable taxes; domestic support and property settlement obligations; most fines, penalties, forfeitures, and criminal restitution obligations; certain debts which are not properly listed in your bankruptcy papers; and debts for death or personal injury caused by operating a motor vehicle, vessel, or aircraft while intoxicated from alcohol or drugs. Also, if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the bankruptcy court may determine that the debt is not discharged.

Under chapter 13 (so-called wage-earner bankruptcy), proceedings require the debtor to propose a repayment plan to pay back his or her debt. This is usually carried over a 3 to 5 year period. This is based upon his or her future income.

Ordinarily you cannot discharge debts such as fines, penalties imposed for violating the law such as court fees and restitution, student loans, child support alimony, property settlement, fraudulent debts, personal injury or death, or recent income tax debts, in general, the new law narrows the requirements for chapter 13 discharge.

Only farmers and fishermen acting in good faith have the right to adjust their debt under chapter 12. In order for a petition to proceed quickly, the debtor must submit to the bankruptcy court a list of creditors, a list of assets and liabilities, and a statement of financial affairs.

The consequences of having a bankruptcy on your credit record can be severe. Creditors may deny your credit in the future or charge you significantly higher interest rates. This may cause you to have future credit difficulties. But there is also a chance that bankruptcy may improve your chance for credit.