A Brief Look at Bankruptcy Laws

Federal Courts

While most people will file for bankruptcy in the federal court in their judicial district, the overall bankruptcy laws that apply to their individual case will also be guided by state laws too. For example, those using the Chapter 7 bankruptcy laws are usually forced to liquidate all saleable assets and many household goods. In the state of Virginia, however, the bankruptcy laws implicitly state that filers are allowed to retain ownership of their wedding and engagement rings. Although many such pieces of jewelry could help to greatly reduce the outstanding debts, the state recognizes the sentimental value of such objects and allows the debtor to make the choice. Normally, it is a court appointed trustee who decides which items are to be sold to pay down debt or help to satisfy creditors waiting for some sort of settlement.

What the Laws Do

Do the laws around bankruptcy remove complete control from the hands of the debtor? No, there are many choices that will be made by the person filing the case, and usually they must first receive court-enforced credit counseling before their documentation can even be submitted. This is to ensure that all alternative routes to resolving the debt issues have been explored. Once this is done, the somewhat lengthy process of filing, assessing, and meeting to formalize plans will begin.
Clearly, the laws that guide bankruptcies are complex and most people will take the time to find and hire a suitable attorney or qualified legal expert. This not only helps them with the different court appearances and document filings required throughout the process, but it also helps them to reduce the lasting effects of the situation.

Types of Bankruptcies

Currently, the two most frequently used types of bankruptcies are the Chapter 7 and the Chapter 13 types. Both are heavily regulated by sets of clear-cut rules, and have far different outcomes. For example, when someone uses the Chapter 7 option they are seeking to completely eliminate their debts and any claims that creditors can make against them. This usually takes around six months of time to complete, and will have a somewhat negative impact on the individual financial history.
The Chapter 13 type is the one that allows the debtor to try to reorganize their debts and find ways to repay their creditors whenever possible. The bankruptcy laws break down their debt as priority, secured, and unsecured types. The priority and secured debts are usually going to end up being repaid in full along with any outstanding interest or fees that have accrued as well. This is usually the way the debtor retains ownership of their home and even some of their savings. The unsecured debts are usually repaid only to a certain percentage of the outstanding balance, and the more accounts handled in this way the more damage done to the individual credit score.

Courts and Laws

As stated earlier, the bankruptcy laws will vary from place to place, and this is the reason to obtain some legal help before beginning the process. People can serve as their own counsel throughout the process, but this is a very time consuming and demanding issue. There are federal and state laws that apply and there are also some taxation issues that most remain unaware of until after the process is completed.

To best understand the bankruptcy laws and the implications of the various types of filings, it is always a good idea to get as much help as possible. The Internet is always a good resource for basic information, but each situation is different and only a qualified expert will be able to help the individual protect their assets and credit as much as possible.

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