Consumer Bankruptcy

Consumer Bankruptcy

What is Bankruptcy?

Bankruptcy is a legal process that allows an individual or a business get a debt relief. The ultimate goal of bankruptcy is to give the individual or business a fresh financial start while being fair to creditors.

How can a consumer file bankruptcy?

There are two ways that an individual consumer can file a bankruptcy: Chapter 7 and Chapter 13. Once bankruptcy proceedings (whether Chapter 7 or Chapter 13) begins, creditors can not collect the debt of the individual to that the bankruptcy process is over.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is often called “liquidation bankruptcy,” liquidation bankruptcy. This process starts when a request is submitted to the bankruptcy court detailing the individual property, debts, and financial condition. The court then appoints a trustee property which determines which, if any, should be sold / liquidated to pay debts.

Many of the individual property is not sold. This characteristic is called “free.” Exempt property may include homes, vehicles, personal property, insurance policies and retirement accounts. Check with a local attorney to know if there are breaks in your area.

Many of the debts are “discharged,” meaning it does not have to be paid. Some debts, however, are not dischargeable, including:

  • Student loans
  • Recent tax debts
  • Spousal Allowance (Child) and the Food
  • Violation Fines (ballots)
  • The bankruptcy process is complete once you have paid or have discharged all debts.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows an individual to pay his debt in time.

The process begins when the individual files a petition with the bankruptcy court. This request includes a complete list of debts and assets of the individual. In addition, the petition must include a payment plan that states how the debt will be paid over the next three to five years.

Then the court appoints a trustee who will review the payment plan.

The trustee has the power to approve or reject the plan. Once a payment plan is approved, the debtor must make monthly payments to the trustee, which will distribute the payments to creditors as presented in the payment plan.

Once the payment plan has been fully satisfied, the individual is out of bankruptcy.

Chapter 7 bankruptcy is usually the best for people who:

  • No steady income
  • It has much exempt property
  • You can not keep a strict payment plan

Chapter 13 bankruptcy is usually best for people who:

  • Do not want to lose their property (real estate and personal property including cars)
  • It has a lot of non-exempt property
  • Has steady income and eventually be able to pay its debts
  • You can live within a strict budget and adhere to a strict payment plan

Do I need a bankruptcy attorney?

If you are filing Chapter 7 or Chapter 13 bankruptcy can be a complicated process. It is vital to know how the law regulates bankruptcy in your state, including property which can claim exemptions. A lawyer knows the details of filing for bankruptcy, and can recommend which chapter of bankruptcy is right for you.

There are many lawyers in New Jersey to represent clients in consumer bankruptcy cases.

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