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