Bankruptcy filing is a process that legally discharges someone from the responsibility of paying a complete debt. The paperwork required when filing bankruptcy depends on the petitioner's amount of debt and the ability to repay the debt within a specified amount of time. Governed at the federal level, all cases are heard in the individual's local federal court.
Under the federal uniform code, the filing chapter is determined by the individual's amount of debt, income, and assets. A majority of the filers fall under chapter 7 or chapter 13 and are responsible for submitting the same documents. These documents include proof of income, a list of all assets, a repayment plan and proof that a credit counseling course was completed.
Low to middle income individuals typically file for chapter 7 bankruptcy. This is known as the fresh start chapter because the debt is liquidated without having to pay any of it back. When available, the judge will sell all non-exempt property to pay creditors. However chapter 7 filers are allowed to keep secured property only if the payments remain current.
The reorganization chapter, chapter 13, allows a debtor to reorganize their debt and pay it off over a span of 3 to 5 years. Also called the wage earner's plan, chapter 13 filers are allowed to remain in their home while adding mortgage arrears to the repayment plan. However, at the same time, the homeowner is responsible for keeping all other mortgage payments current.
The law has very strict guidelines governing exempt and non-exempt property. Certain personal items such as a home, furniture, jewelry, clothing and even pets are exempt up to a certain amount. Federal funding such as public assistance, Social Security, and Disability is completely exempt.
Debtors found guilty of trying to fraudulently hide property in order to avoid having them liquidated may face legal action. At the judge's description, the courts may use tax refunds, property sold or transferred within the last year as well as property given away to pay creditors. All personal items used on a daily basis, such as cost of food, are excluded from liquidation.
Bankruptcy filing does have several benefits. However, it also has many disadvantages. After a discharge it granted, it stays on your credit report for 10 years. That's 3 years longer than delinquent accounts. The filer is also considered a much higher risk than someone with bad credit. That person could be denied credit for the first few years after the ruling.
Under the federal uniform code, the filing chapter is determined by the individual's amount of debt, income, and assets. A majority of the filers fall under chapter 7 or chapter 13 and are responsible for submitting the same documents. These documents include proof of income, a list of all assets, a repayment plan and proof that a credit counseling course was completed.
Low to middle income individuals typically file for chapter 7 bankruptcy. This is known as the fresh start chapter because the debt is liquidated without having to pay any of it back. When available, the judge will sell all non-exempt property to pay creditors. However chapter 7 filers are allowed to keep secured property only if the payments remain current.
The reorganization chapter, chapter 13, allows a debtor to reorganize their debt and pay it off over a span of 3 to 5 years. Also called the wage earner's plan, chapter 13 filers are allowed to remain in their home while adding mortgage arrears to the repayment plan. However, at the same time, the homeowner is responsible for keeping all other mortgage payments current.
The law has very strict guidelines governing exempt and non-exempt property. Certain personal items such as a home, furniture, jewelry, clothing and even pets are exempt up to a certain amount. Federal funding such as public assistance, Social Security, and Disability is completely exempt.
Debtors found guilty of trying to fraudulently hide property in order to avoid having them liquidated may face legal action. At the judge's description, the courts may use tax refunds, property sold or transferred within the last year as well as property given away to pay creditors. All personal items used on a daily basis, such as cost of food, are excluded from liquidation.
Bankruptcy filing does have several benefits. However, it also has many disadvantages. After a discharge it granted, it stays on your credit report for 10 years. That's 3 years longer than delinquent accounts. The filer is also considered a much higher risk than someone with bad credit. That person could be denied credit for the first few years after the ruling.
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