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Friday, February 11, 2011

Proceedings of Bankruptcy Filing

There are two types of bankruptcy proceedings that bankruptcy attorneys work for. The first is the process of liquidation under Chapter 7 bankruptcy, and the second is a court approved plan for payment of the debt under Chapter-9, Chapter 11, Chapter 12, Chapter-13. And this is how a debtor can apply for bankruptcy:

Chapter-7 (Bankruptcy Law): This is a liquidation bankruptcy. In this scenario, the debtor can change all non-exempt property to the trustees of the bankruptcy, such as money from the debtor's account savings, your car, all valuable assets. Then converted into cash and distributed among creditors. Once the procedure is over, the debtor receives a discharge notice from the court. And then he gets rid of all type of debts.

Chapter-9 (Adjustment of Debts for a Municipality): It was passed by Congress nearly sixty years ago. This is a municipal decision by federal mechanism. It is very similar to Chapter-11. However, it is available for municipalities only. And this includes counties, towns, municipal utilities, taxes on districts, schools and towns and cities.

Chapter-11 (Reorganisation): In this chapter, only the companies or their lawyers to file for bankruptcy. In this scenario, companies are allowed to continue their business while paying their creditors under the court approved plan.

Chapter-12 (Adjustment of debts of a family farmer with regular annual income): This service debt relief for farmers. this is almost similar to Chapter-13 where the courts allow them to pay your debt over a specified period up to three years. May be extended up to five years if the court permits.

Chapter-13 (Adjustment of debts of an individual with regular income per year): This facility of debt relief is available for individuals, especially those who do not qualify for Chapter 7 bankruptcy filing. This is very different from Chapter-7. Under this category, debtors do not have to sell their valuable property to pay their debt. Rather, the court allots a certain period of time so they can pay their debt. The time period can be up to three years. You can extend it up to five years with special permission from the court. Lawyers go through the debtor's financial situation such as your monthly income, your financial situation, etc then set a monthly amount to pay the debt.

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