Even those who never need the help it can provide, understanding the basics behind the process can be very important.
Since the majority of Americans are carrying upwards of $10,000 in personal debt, knowing how these debts could be impacted by the bankruptcy process is valuable information.
Qualifying For Bankruptcy The qualification process is perhaps one of the most important aspects.
Although many people seek total debt elimination, not everyone will qualify to have their debts discharged in Chapter 7.
If a debtor's income exceeds the median income level of their state, or their disposable income is deemed sufficient, they may not be eligible for Chapter 7.
In these cases, many people will qualify for Chapter 13 debt repayment.
Knowing the qualification standards prior to filing for bankruptcy can ensure a debtor does not waste their time filing the wrong case or end up disqualified due to certain actions.
Accumulating too much debt within 90 days prior to filing, strategically moving assets or acquiring more income can all prevent a person from qualifying for bankruptcy.
Obtaining A Debt Discharge Once a debtor is qualified for a particular type of bankruptcy, reporting all their debts and assets to the court becomes top priority.
It is extremely important that the debtor provide the full list of both debts and assets on the bankruptcy petition.
Leaving out information can jeopardize the outcome of the case and prevent a discharge from being granted.
In a Chapter 7 case, the debtor will have their assets and debts reviewed by the court.
The court will determine if there are any funds or assets sufficient for liquidating in order to satisfy debts to creditors.
If not, the court may grant a debt discharge, in which creditors must adhere and erase the debts from the debtor's account.
In general, most large assets such as a home, car, personal property and benefit funds will be exempt from liquidation.
In a Chapter 13 case, the court will review the debtor's debts and assets in order to develop a repayment plan.
This plan typically involves rolling all of the debt payments into a single monthly payment requirement over the next three to five years.
Once the debts have been repaid, the debtor will be granted a discharge.