Bankruptcy for Beginners
When you file for bankruptcy you can stop harassment, foreclosures, repossessions and lawsuits and be allowed to keep your home, your car, assets and wages. In order to better understand your bankruptcy options, we will take a look at the two most common bankruptcy options for individuals:
In a chapter 7 bankruptcy case the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds to pay creditors. Part of the debtor’s property may be subject to liens but will allow the debtor to keep certain "exempt" property. A trustee may liquidate the debtor’s remaining assets therefore when you file for a Chapter 7, you may lose property. Once the debts are discharged, a debtor is no longer obligated to pay them.
A chapter 13 bankruptcy is also known as a wage earner’s plan because it enables individuals who can provide proof of a regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years that is dependent on the debtor’s income. Payment plans cannot exceed a period longer than five years. During this time the law forbids creditors from any form of collection effort.