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Different Chapters of Bankruptcy Law

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by , 07-28-2011 at 07:42 PM (1518 Views)
Bankruptcy was created to give debtorsa second chance. Depending on the type of Bankruptcy, the debtor’s debt mightbe discharged or restructured. Chapter Seven (7) bankruptcy is the generaldischarge. All of the debtor’s debt is discharged, except for “legalobligations” such as alimony and child support.
Chapter eleven(11) bankruptcy is for restructuring of businesses. The bankruptcy courtwill determine what property is necessary for maintaining the business and whatis not. Those that are essential will be kept with the business and thenon-essential will be sold off and paid to the creditors. What is or is not anessential property is dependent on the facts. If the business is a fast foodrestaurant, a company plane is not essential. However, if the business is partof an airline industry, the planes are essential.

Chapter twelve (12) is a farmerbankruptcy. This bankruptcy is farmer exclusive and provides more protection.

Chapter thirteen (13) is chapter 11bankruptcy for private individuals. Unlike chapter 7 bankruptcy whichdischarges most debts but annihilate your credit score, chapter 13 allows forpartial discharge and restructuring. Chapter 13 is composed of two sections:the normal discharge and the superdischarge (also known as the hardshipprovision). The normal discharge allows you to work out a plan with yourcreditors. You shall pay them a certain amount over a period of time and therest becomes dischargeable. The superdischarge is for people who are sufferingfrom long lasting illness or injury. This section discharges even more debt andallows for easier payments.

The bankruptcy proceeding normallygoes as follows: you or your attorney applies for bankruptcy; you inform all ofyour creditors that you are declaring bankruptcy; a hearing is held for all thecreditors to determine who is or is not a secured creditor, a trustee isappointed to protect all unsecured creditor, adversarial hearings are held, thejudge makes a ruling as to dis-chargeability and how much the debtor is requiredto pay each month, the debtor pays the required amount, and upon completion thedebts are discharged and the debtor gets out of bankruptcy.
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