| A bankruptcy law suit aims at helping | | | | There is yet another law, which enables |
| the debt ridden citizen or an | | | | the debtor to keep his valuable assets |
| organization to be relieved from the | | | | such as house under chapter 13. It |
| pressures of the existing debts. The | | | | allows the debtor to propose a plan to |
| goal is achieved by providing the debtor | | | | pay off the creditors over a period of |
| a bankruptcy discharge, which releases | | | | three to five years. This provision |
| him from the personal liability from | | | | comes in handy for the debtors who |
| certain specific debts. It also | | | | cannot qualify for relief under the |
| prohibits the creditors form initiating | | | | 'means test' of chapter 7. If the |
| any legal action to realize their debts. | | | | repayment plan of the debtor is |
| There are various types of bankruptcy | | | | confirmed by the court, he can make the |
| laws that provide debt relief or | | | | payment to his creditors through the |
| discharge in form of debt liquidation to | | | | trustee of the court and save his asset. |
| the debtors. | | | | The only thing is that unlike in chapter |
| Chapter 7 of Bankruptcy | | | | 7, the relief in the form of discharge |
| Under chapter 7 of bankruptcy, the | | | | of debts cannot be availed immediately. |
| process of liquidation of debts is | | | | The debtor must fulfill the conditions |
| supervised by a trustee. The trustee | | | | of repayments. Under chapter 13, the |
| takes over the assets of the debtor's | | | | debtor is protected from lawsuits, |
| estate and reduces them into cash. The | | | | garnishments and other forms of creditor |
| debtor can seek exemption to retain | | | | actions while the repayment plan is |
| certain types of assets of his property | | | | under implementation. The discharge of |
| and also the rights of the secured | | | | debts is also somewhat broader under |
| debtors. In most of the cases under | | | | chapter 13 than under chapter 7, in the |
| chapter 7 of bankruptcy, the debtor has | | | | sense, that more debts are cleared off |
| little or no non-exempt property. | | | | by the repayment plan. |
| Therefore, there may not be any | | | | Chapter 11 of Bankruptcy |
| liquidation of the debtor's assets. | | | | In case of organization and commercial |
| These cases are also called as 'no-asset | | | | enterprises the relief through the |
| cases'. In such cases, the creditor with | | | | discharge of debts is provided through |
| unsecured claims can get back his loan | | | | an act called Reorganization. This is |
| only if he can file a proof before the | | | | done under chapter 11. The assets of the |
| bankruptcy court of the existence of | | | | debtor under the chapter 11 are not |
| assets, which can be reduced to cash. | | | | liquidated and he continues to operate |
| Since there are generally no such assets | | | | his business. In this way, he can also |
| left with the debtor, he gets away | | | | make payments to his creditors. This |
| without paying back any unsecured loans. | | | | reorganization of repayment of debt is |
| A debtor, if he is an individual, | | | | done through the approval of the court. |
| normally receives a discharge within a | | | | A debtor, under chapter 11, has to make |
| few months of putting up his application | | | | his proposal for repayment within 120 |
| for such relief. | | | | days of filing the case for bankruptcy. |
| A Bankruptcy Abuse Prevention and | | | | He has also to file a disclosure |
| Consumer Protection Act of 2005 amended | | | | statement to his creditors containing a |
| the Bankruptcy Code so that the | | | | detail of his proposal to clear off |
| individual debtor should pass a 'means | | | | their loan. The court ultimately |
| test' to qualify for relief of discharge | | | | approves or disapproves the plan of |
| under the chapter 7. If the income of | | | | reorganization. If the plan is approved |
| the debtor is higher than a certain | | | | and confirmed, the debtor can reduce his |
| level, he may not be eligible for the | | | | loan liability by repaying a part of his |
| relief. | | | | obligations and seek discharge for the |
| Chapter 13 of Bankruptcy | | | | other debts. |