Legalities of bankruptcy

Up to your ears (and over) in debt and don't know what to do or where to turn? If you are thinking about bankruptcy, your finances are in bad shape. You should gather information before you decide on any course of action to straighten out your financial situation.

Under the United States Constitution, Article 1, Section 8, 'The Congress shall have the power'To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States.' Cases are handled in bankruptcy courts in the 94 United States and U.S. Territories judicial districts.
The purpose of bankruptcy law stated by the Supreme Court in 1934 is to give an honest debtor a start over without worrying about previous debt. Under Title 11 of the United States codes, there are six kinds of bankruptcy case:
Chapter 7 - The simplest and easiest bankruptcy proceeding, it is usually called straight or liquidation bankruptcy. It can be used by individuals and businessmen.
Chapter 9 ' This is for municipalities.
Chapter 11 ' This is most often used by businesses, but it can be used by individuals
Chapter 12 - This is used by fishermen and family farmers
Chapter 13 - It is a bankruptcy in which debts are reorganized but not forgiven. It is used both by businesses and also by people who have a regular source of income.
The process of bankruptcy is determined by the Federal Rules of Bankruptcy Procedure (Bankruptcy Rules) and the local rules of each bankruptcy court. Most of the details of a bankruptcy case are handled away from the court. Under chapter 7, 12, 13, and sometimes chapter 11 bankruptcy; administrative details are handled by the trustee appointed to the case, and you will not even see the bankruptcy court. In chapter 11, all you have to do is appear at a meeting of your creditors. Chapter 13 bankruptcy may require a meeting with the bankruptcy judge to confirm debt repayment plans.

Individuals most commonly used chapter 7 and chapter 13 bankruptcy. Under chapter 7, all your assets are transferred to an estate managed by a trustee appointed by the U.S. Trustee Office who then pays your creditors. Under chapter 13, a debt repayment plan is created and debts are paid over a three to five year period.

Not all debts can or will be discharged under bankruptcy. It varies according to the chapter of the Bankruptcy Code. When a debt is discharged, it means you don't have to pay the debt. Once it is discharged, the creditor cannot take any form of action to collect the debt. The length of time it takes to get debts discharged depends on the type of bankruptcy filed for. A chapter 7 bankruptcy is the quickest. Since other chapters include a payment schedule, the time varies accordingly.

Bankruptcy is definitely the last thing you want to do to straighten out your finances. If you can't figure out any other solution to get out of debt, investigate the different chapters of bankruptcy and determine which will affect you the least and benefit you the most.

Be sure to visit Information About Bankruptcy for more information and helpful resources.