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Every year, more than 1,000,000 Americans file for protection under Federal bankruptcy laws. Although some bankruptcy claimants are deemed as credit abusers and/or considered financially irresponsible, many hardworking individuals and businesses can succumb to financial difficulty and face irreparable economic crisis. Bankruptcy is designed as a legal option to help resolve such a crisis, and act as a financial life preserver for those drowning in debt. To discuss your bankruptcy options or other areas of recourse that might be available to you, contact Ron Allen, a qualified bankruptcy attorney who can advise you of your legal rights as stated under Bankruptcy Law and federal Bankruptcy courts.
Bankruptcy is a federal court process designed to help individuals and businesses eliminate their debts or repay them under the protection of the bankruptcy court. Bankruptcies can generally be described as liquidation or reorganization. Under a liquidation bankruptcy (Chapter 7), a debtor files to eliminate debt through the bankruptcy court. Under a reorganization bankruptcy (Chapter 13), a debtor files a plan with the bankruptcy court proposing how to repay creditors.
Chapter 7 cases are commonly referred to as straight bankruptcy or liquidation cases, and may be filed by an individual, corporation, or partnership. A Chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in Chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code.
Part of the debtor’s property may be subject to liens and mortgages that pledge the property to other creditors. In addition, the Bankruptcy Code will allow the debtor to keep certain “exempt” property; however, a trustee will liquidate the debtor’s remaining assets. Accordingly, potential debtors should realize that the filing of a petition under Chapter 7 may result in the loss of property.
A Chapter 13 bankruptcy is also called the wage-earner’s plan. It enables individuals with 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. Chapter 13 permits individuals to keep their property by repaying creditors out of their future income. It is not available to corporations or partnerships. After completion of payments under the plan, Chapter 13 debtors receive a discharge of most debts.
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