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Bankruptcy Law Bankruptcy law was created with the purpose to give the opportunity to a debtor to pay his or her debts through the division of his assets among his creditors. A debtor is a person who is unable to pay his credits. Some bankruptcy laws allow a debtor to stay in business; others may free them of the financial obligations. But in any cases the law was developed to give some measure of equality to all creditors. There are different types of bankruptcy. They are pointed in the title of the Chapters of the Federal Bankruptcy Act.
And each Chapter has a different set of laws and rules. Frankly speaking there are two basic types of Bankruptcy proceedings: liquidation and rehabilitation. Liquidation can be filed under Chapter 7. It is the common type of bankruptcy proceeding (about 70 % of cases).
If a person has chosen this type of Bankruptcy proceedings he or she will be appointed with a trustee who will collect the non-exempt property. A trustee should sell the property and distribute the proceeds to the creditors. A debtor has no right to transfer property that has been declared. Rehabilitation is mentioned in Chapters 11, 12, and 13.
A debtor has a chance to pay off creditors from his or her future earnings. In this case a debtor has an opportunity to retain the property. As in the previous case a debtor will be appointed with a trustee who will supervise the assets of a debtor. But in any case the Bankruptcy Code has been established with the priority of creditors' interests.
Chapter 7 is more often used by individuals because it gives a person an opportunity to get out from under the burden of debt quickly. But a debtor may lose almost all his or her property even a house with the proceeds used to pay off the debts. But there are some types of property that can be "exempted" under the choice of Federal law or State's law. This type of Bankruptcy law allows a debtor to pay a great amount of money for a short period of time and become free from the debt. Chapter 13 is not so popular (only 25 % used it).
May be because of the complex process of the law. It is known as a wage earner's plan. A debtor with his or her creditors works out a periodic payment plan with the purpose to pay off the debts. Creditors decide to forgive a portion of the debts to them; but a debtor must repay his or her reduced debts over time. As a rule a debtor has to make monthly payments to the bankruptcy trustee-a federal official. The official is appointed by the court.
The trustee will make distributions to your creditors. Usually a repayment plan will be realized for three - five years. It should be pointed that the creditors listed in the plan has no right to take any collection actions against the debtor if he or she makes regular payments under a repayment plan. The great advantage of the law is that the debtor should not sell his property. But if a debtor does not fulfill the terms of a negotiations the Court treats the matter as Chapter 7 liquidation.
But there are some disadvantages of Chapter 13. The first one is that debts can linger for years, burdening future income. The best options of the laws should be determined by a debtor himself. First of all the decision will be depended on financial picture. If an individual has serious financial difficulties it would be better for him or her to prefer Chapter 7 straight bankruptcy proceeding because it is faster to complete, giving the debtor a financial "fresh start" without the years of sacrifice. (1) Chapter 13 plan is better to use if a person has a steady income, a stable job, and wants to pay off most or all of his or her debts. Most of all it can be used if the sum of the debt is not very big, Your debt must be under $ 1, 000, 000 (e.
g. , unsecured debts are less than $ 250, 000 and secured debts less than $ 750, 000). (3) If there are cases with business bankruptcies and restructuring Chapter 11 can be used. It is not so common among individual consumers because it is very complex and expensive to pursue. In cases examining, there are two different situations. In the first case there is an individual (a woman) who has debts and who wants to start new more profitable business after getting out of present debts. May be for her it would be better to file under Chapter 7 because it gives a person an opportunity to get out from debt quickly. Most of all federal law does not forbid employers to hire anyone for filing bankruptcy.
If the woman files for Chapter 7 it will not be a huge problem because she will get all her future incomes. But if she files for Chapter 13 bankruptcy, she will probably have her wages garnished as part of the plan. In the other case the man should file under Chapter 13, because the sum of the debt must not be very big and he will not lose his property. Otherwise he has to lose his car.
While filing bankruptcy a person can lose almost all his or her property. But there are some laws that protect certain types of your property from creditors. They are called Bankruptcy Exemptions. They are passed by every state and allow you to protect such things as your home, car, pensions, motor vehicles, clothing, tools, and other important property. Ohio law provides several exemptions that protect a debtor property: homestead - up to $ 5, 000 in real or personal property; wages - 75 percent of weekly earnings exempt; automobiles - one motor vehicle in the amount of $ 1, 000; other property - $ 200 in clothing, beds, and bedding; $ 300 in one cooking unit and one refrigerator; $ 400 in cash on hand, money due and payable, money to become due within ninety days, tax refunds, and money on deposit with a bank, savings and loan association, credit union, public utility, landlord, or other person; $ 200 in household furnishings, household goods, appliances, books, animals, crops, musical instruments, firearms, and hunting and fishing equipment; $ 600 in one or more items of jewelry. (4) Bibliography: Bankruptcy Law Questions. (1995). FreeAdvice.
Retrieved July 27, 2006, from web Bankruptcy Law. (2006, February 13). In Wikipedia, The Free Encyclopedia. Retrieved July 27, 2006, from web Bankruptcy Law. Learn About Chapter 13 Bankruptcy. (2006). Estreet IP, LLC. Retrieved July 27, 2006, from web Ohio State Bankruptcy Exemptions. (2006).
Estreet IP, LLC. Retrieved July 27, 2006, from web
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