What is Bankruptcy?

Generally, when someone can't pay off his or her debts, they seek relief from the debts through bankruptcy. Bankruptcy is a legal process which is usually imposed by a court order. 

Chapter 7 

Unlike chapter 13 bankruptcy, Chapter 7 allows individuals, businesses, and non profit organizations to discharge most debts, as long as they meet the bankruptcy means test. If you want to know whether your debt is dischargeable, you should consult a bankruptcy attorney. 

The bankruptcy means test involves determining your income and expenses, and whether you have enough resources to repay your debts. In some cases, you may be required to file a repayment plan with your creditors. The plan may include paying off your debts in installments over three to five years. 

In addition to paying your creditors, your trustee may also attempt to recover some of your property. Depending on your circumstances, you may be allowed to keep some of your assets. In some states, you may be able to use the federal exemption system to protect some of your property. 

You can get free bankruptcy legal help from the Legal Services Corporation. There are also bankruptcy counseling services available. A credit counselor can help you determine whether you are eligible for bankruptcy, and can help you create a repayment plan. It is best to seek representation from a professional. In Harrisburg, a bankruptcy attorney can help you with the legalities of filing bankruptcy. 

The Bankruptcy Code requires that you file a certificate of financial responsibility with the bankruptcy court. This certificate must show that you completed a course on financial management. You may also have to submit a profit and loss statement. This will help your attorney determine whether you can keep your property. 

There are also several debts that are not dischargeable in chapter 7. These include child support and alimony, as well as loans guaranteed by a governmental unit. 

Chapter 7 bankruptcy is a common form of bankruptcy, but there are a few drawbacks. While it may give you a fresh start, it isn't a quick solution to your financial woes. Some debts, such as tax debt and student loans, cannot be discharged in chapter 7. 

Chapter 13 

Generally, a Chapter 13 bankruptcy requires the debtor to propose a plan to pay creditors over a three to five year period. The plan is approved by a bankruptcy judge, and a judge can alter the plan if necessary. Usually, the debtor's monthly income is used to determine the repayment plan.

If the debtor misses payments, they may be disqualified from receiving Chapter 13 relief. They may have to convert to Chapter 7 bankruptcy. During a Chapter 13 case, the debtor cannot file for a personal or business loan. The debtor may be required to pay certain back taxes. 

The debtor is required to provide the Trustee with a copy of their income statement and proof of financial management. They also must submit copies of all their late filed federal tax returns. 

When the plan is complete, the Trustee will send a report to the creditors stating how much money the debtor has paid to them. The report will also note the balance due on the plan. The Trustee will also object to late claims. When the plan is approved by the court, the claims will be discharged. 

The first payment must be made within 30 days of filing the bankruptcy. The debtor must also provide the Trustee with a copy from their attorney of a payment receipt. The debtor may also be able to amend the plan. 

If a debtor misses a payment, the Trustee will send them a notice. This notice is like a legal "stop sign" for the debtor's creditors. The notice makes it illegal for the debt collectors to try to collect on the debt. 

If a debtor misses several payments, they may be unable to make future payments. If a debtor is unable to make payments, the creditor may ask the court to allow them to collect the debt. The court may also authorize a creditor to repossess a vehicle. 

When a debtor misses a payment, they should contact an attorney immediately. They may be able to change the repayment plan to make up for the missed payments. It may also be possible for a bankruptcy judge to allow them to convert their case to Chapter 7. 

Chapter 13 bankruptcy is designed to help individuals who need help paying their debt. It can protect co-signers and stop foreclosures and repossessions. Ultimately, it can help a debtor get back on track and prevent future debt from becoming a problem.