Some Chapters are more suitable for different needs, but bankruptcy, simply, gives relief for debtors via the automatic stay on creditors’ actions right after the filing. The automatic stay means that all forms of harassment that debtors can be subject to, including letters, phone calls as well as other requests for funds, must cease. Ultimately, if every one of the requirements of the court are fulfilled in the truthful and open manner indicative of complete disclosure, several types of discharge can be utilized enabling the debtor to once again take up their lives or businesses once more.
Individuals weighted down by consumer debt, particularly credit card debt, can expect to have this debt wiped out since most credit card debt is unsecured. Debtors filing under chapter 7 have to make their non-exempt assets obtainable for liquidation to secured creditors. The debtor must provide for payment or transfer over the collateral. Unsecured creditors may not receive complete payment or, indeed, any payment. The bankruptcy court appoints a trustee who puts together a meeting with creditors and deals with the disposal of assets to creditors in line with their status. At the end of the process the debtor often receives a discharge; which means the debtor is liberated from the troublesome debt and in a position to start life afresh without more harassment by creditors.
Though chapter 7 is a legal option predicated on wiping out debt, additionally there is a provision for reaffirmation of a specific debt assuming the debtor can show ample income. In this case the debtor makes arrangements with a creditor to keep certain property. Chapter 7 does not mean the loss of all assets, so household assets and exempt property can usually be retained.
Some other approaches to bankruptcy concentrate on reorganization rather than liquidation. These approaches involve the creation in the form of a repayment plan to ensure that the debtor can keep property or a business after reorganization, and sometimes consolidation, of debt. Chapter 13 is a reorganization approach that is suitable for individuals who have a steady income sufficient enough to keep their property and manage their mortgages given support and advice.
Again the debtor receives relief on filing because of the hold on creditor actions, and co-debtors will also be shielded from creditors. A repayment plan is developed during debt counseling, although unsecured creditors may receive little or no repayments based on the debtor’s circumstances. After a period of three to five years, the debtor is likely to obtain a discharge of debts.
Chapter 12 offers family farmers and fishermen a similar method of debt management but one which includes greater debt burdens that include those connected with operating these businesses.
Filing chapter 11 is a bankruptcy option that provides businesses with the an opportunity to stay in control and operate the business, in the long run, eliminating the debt burden. This option is the best option for larger businesses as it is a complex, lengthy and potentially expensive business. Although it gives the business the tools they need to succeed. It has flexibility in that repayment plans can be modified as the business environment changes.
Whether an individual or a business, under most cases discharge means that the debtor is free from debts in existence prior to filing the petition.
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