Personal Bankruptcy – Too Personal, Yet Crucial
The United States Congress initially enacted the Bankruptcy Code in the year 1978 and which was recently amended just in the Spring of 2005. As with the general goal of the Bankruptcy Code is to provide relief to members of society who have gotten themselves too far into unworkable debt, Personal Bankruptcy also enables an individual debtor to temporarily or permanently stir away from paying some or completely all of their personal debts. In doing so, independent consumers or businesses may resort to either of the two basic forms of personal bankruptcy, the Chapter 7 Liquidation or ‘No Asset’ Bankruptcy and the Chapter 13 or the Income Adjustment Plan.
The Two Basic Types of Personal Bankruptcy
Most people almost immediately think of the Chapter 7 personal bankruptcy when considering filing for bankruptcy to solve their debts. Under this Chapter 7 ‘No Asset’ personal bankruptcy, the debtor is considered or is certified by the bankruptcy as an individual (consumer or business) who could not in any way pay any more of his debts, hence with no asset or means remaining to reimburse to his creditors. In this process, the court determines ability of the debtor to pay this debts by performing a ‘Means Test’, after which, the person’s debts are ‘liquidized’ or effectively wiped out by the court, and the debtor is no longer required or ‘discharged’ from paying off any of those debts.
Under Chapter 13 Bankruptcy on the other hand, an individual with a regular source of income, in contrast to those who have ‘no asset’, undergoes a rehabilitation or adjustment plan aiming to reduce the payment of debts into just a percentage of his liable amount outstanding. In this process, the individual works with a US bankruptcy trustee appointed by the court to set up the payment plan under which the debtor pays a lump sum of his remaining or disposable assets to be paid to his creditors according to the agreed upon payment, at which point, the debtor is relieved from further obligation on the debts while saving him from further law suits.
Yes, both may save you from debt, but, the down side of filing for a personal bankruptcy however is that few of the civic community may know that you filed for a bankruptcy. All bankruptcy files go to the public record and credit bureaus keep the bankruptcy record for a period lasting at least a decade.