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History and Chapters of Bankruptcy

A bankruptcy law suit aims at helping thedebtor to keep his valuable assets such as
debt ridden citizen or an organization to behouse under chapter 13. It allows the debtor
relieved from the pressures of the existingto propose a plan to pay off the creditors
debts. The goal is achieved by providing theover a period of three to five years. This
debtor a bankruptcy discharge, which releasesprovision comes in handy for the debtors who
him from the personal liability from certaincannot qualify for relief under the 'means
specific debts. It also prohibits thetest' of chapter 7. If the repayment plan of
creditors form initiating any legal action tothe debtor is confirmed by the court, he can
realize their debts. There are various typesmake the payment to his creditors through the
of bankruptcy laws that provide debt relieftrustee of the court and save his asset. The
or discharge in form of debt liquidation toonly thing is that unlike in chapter 7, the
the  debtors.relief in the form of discharge of debts
cannot  be  availed  immediately.
Chapter  7  of  Bankruptcy
The debtor must fulfill the conditions of
Under chapter 7 of bankruptcy, the process ofrepayments. Under chapter 13, the debtor is
liquidation of debts is supervised by aprotected from lawsuits, garnishments and
trustee. The trustee takes over the assets ofother forms of creditor actions while the
the debtor's estate and reduces them intorepayment plan is under implementation. The
cash. The debtor can seek exemption to retaindischarge of debts is also somewhat broader
certain types of assets of his property andunder chapter 13 than under chapter 7, in the
also the rights of the secured debtors. Insense, that more debts are cleared off by the
most of the cases under chapter 7 ofrepayment  plan.
bankruptcy, the debtor has little or no
non-exempt property. Therefore, there may notChapter  11  of  Bankruptcy
be  any  liquidation  of the debtor's assets.
In case of organization and commercial
These cases are also called as 'no-assetenterprises the relief through the discharge
cases'. In such cases, the creditor withof debts is provided through an act called
unsecured claims can get back his loan onlyReorganization. This is done under chapter
if he can file a proof before the bankruptcy11. The assets of the debtor under the
court of the existence of assets, which canchapter 11 are not liquidated and he
be reduced to cash. Since there are generallycontinues to operate his business. In this
no such assets left with the debtor, he getsway, he can also make payments to his
away without paying back any unsecured loans.creditors. This reorganization of repayment
A debtor, if he is an individual, normallyof debt is done through the approval of the
receives a discharge within a few months ofcourt. A debtor, under chapter 11, has to
putting  up  his application for such relief.make his proposal for repayment within 120
days  of  filing  the  case  for  bankruptcy.
A Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005 amended the BankruptcyHe has also to file a disclosure statement to
Code so that the individual debtor shouldhis creditors containing a detail of his
pass a 'means test' to qualify for relief ofproposal to clear off their loan. The court
discharge under the chapter 7. If the incomeultimately approves or disapproves the plan
of the debtor is higher than a certain level,of reorganization. If the plan is approved
he  may  not  be  eligible  for  the  relief.and confirmed, the debtor can reduce his loan
liability by repaying a part of his
Chapter  13  of  Bankruptcyobligations and seek discharge for the other
debts.
There is yet another law, which enables the



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