Bankruptcy

The last resort
Bankruptcy is the state of insolvency or the inability to pay off your debts. Individuals and business faced with this situation may seek relief from their debts by filing for legal bankruptcy. Filing for bankruptcy should not be taken lightly and only considered as a last resort measure to gain relief from overwhelming debt.

Types of bankruptcy
There are two types of personal bankruptcy most commonly used. They are Chapter 13 and Chapter 7. Two other less commonly used types of bankruptcy are Chapter 11, used primarily for businesses, and Chapter 12, which applies only to family farms.
  1. Chapter 7 - Also known as straight bankruptcy, it involves liquidating all assets that are not exempt. Exempt property includes cars, work-related tools and basic household furnishings. Chapter 7 results in a complete discharge of debts. A person can file for Chapter 7 only once every eight years.
    The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it more difficult for individuals to file for Chapter 7 bankruptcy. Individuals and families with incomes above median levels in their home states and who can pay back at least $6,000 over five years are required to file for Chapter 13 rather than Chapter 7.
  2. Chapter 13 - Debtors are given a repayment plan. Chapter 13 allows filers to keep property that they might otherwise loose. Debtors in Chapter 13 are subject to mandatory education in personal finance management.

Debts exempt from discharge
Personal bankruptcy does not erase the following types of debts:
  • Child support
  • Alimony
  • Back taxes
  • Student loan debt


Consumer Protection Laws (Contd.)

Related Articles
  1. Taxes

    How to Hire a Bankruptcy Lawyer

    How do you find the right bankruptcy lawyer? What you should look for to determine the right attorney for you.
  2. Personal Finance

    Should You File for Bankruptcy?

    Find out how to determine whether bankruptcy will help or hurt your financial situation.
  3. Taxes

    How Long Bankruptcy Will Affect You

    How long will the sad chapter of bankruptcy impact the rest of your life?
  4. Investing

    Don't Go Broke Buying Bankrupt Stocks

    Don't be tricked by bankrupt companies' low stock prices; they're low for a reason.
  5. Small Business

    Not Too Big To Fail: Corporate Financial Struggles

    Even the biggest corporations are not immune to financial failure. Here are five the biggest corporate bankruptcies of the decade.
  6. Taxes

    Student Debt: Is Bankruptcy The Answer?

    Student loans can be a huge financial burden, but bankruptcy won't necessarily save you from paying.
  7. Investing

    Buying a House After Bankruptcy? It Is Possible!

    Buying a house after bankruptcy is not impossible. It just takes time to repair your credit score and demonstrate you're a good risk for a mortgage.
  8. Investing

    Stone Energy Slumps Amid Bankruptcy Plans

    Stone Energy's stock has plunged amid the company's plans to file voluntary chapter 11
  9. Personal Finance

    Debt Settlement: Cheapest Way to Get Out of Debt?

    Debt settlement is not for everyone, but for those seriously in debt it may prove an effective means of solving the problem.
  10. Personal Finance

    Should You Join A Sorority Or Fraternity?

    Consider the many expenses and possible advantages associated with Greek life before joining a sorority or fraternity.
Trading Center