Bankruptcy Law
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Bankruptcy Law

Bankruptcy is the legal process by which an individual or an organization is allowed to restructure, reduce or eliminate any legal debt that the debtor has incurred.

There are three major types of Bankruptcy: Chapters 7, 11, & 13.

Chapter 7 Bankruptcy

This applies to both individuals and organizations. This is the process by which the debtor lists all of his/her/its debts and liabilities and assets, and the Bankruptcy Court, through the Office of U.S. Trustee, takes all of the assets and turns them into cash and pays off each of the creditors a certain amount. At the end of the process, all debts are deemed to be paid or discharged, and the person or organization can now proceed with his/her/its life as if the debts never existed.
One of the most important aspects of this Bankruptcy is the idea of the Exemption. This means that there is certain property that is exempt from this process and is not seized by the U.S. Trustee, and the debtor gets to keep the property after the bankruptcy.

Chapter 13 Bankruptcy

This applies only to individuals and is the process whereby debts are reduced in size and a payment plan is put into place to pay them off. This plan will usually go on for a number of years, and at the end, the debtor is not liable for any of the debts incurred prior to the filing of the bankruptcy. This differs from a Chapter 7 Bankruptcy as it does not involve the individual surrendering property to satisfy the debt.

Chapter 11 Bankruptcy

This is the same as a Chapter 13 Bankruptcy but is for organizations and corporations and is the process whereby debts are reduced in size and a payment plan is put into place to pay them off. This plan will usually go on for a number of years, and at the end, the debtor is not liable for any of the debts incurred prior to the filing of the bankruptcy. This bankruptcy differs from a Chapter 7 Bankruptcy as it does not involve the organization or corporation surrendering property to satisfy the debt.

Bankruptcy Litigation

This is the process whereby debtors and creditors seek the Bankruptcy Court’s assistance in resolving disputes. The most common cases are violations of the automatic stay and discharge provisions, where a creditor has attempted to collect a debt that cannot be collected or where the debtor is alleged to have committed some type of fraud.

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