History and Chapters of Bankruptcy

A bankruptcy law suit aims at helping the debtdebtor to keep his valuable assets such as house
ridden citizen or an organization to be relievedunder chapter 13. It allows the debtor to propose
from the pressures of the existing debts. Thea plan to pay off the creditors over a period of
goal is achieved by providing the debtor athree to five years. This provision comes in handy
bankruptcy discharge, which releases him fromfor the debtors who cannot qualify for relief
the personal liability from certain specific debts. Itunder the 'means test' of chapter 7. If the
also prohibits the creditors form initiating any legalrepayment plan of the debtor is confirmed by the
action to realize their debts. There are variouscourt, he can make the payment to his creditors
types of bankruptcy laws that provide debt reliefthrough the trustee of the court and save his
or discharge in form of debt liquidation to theasset. The only thing is that unlike in chapter 7,
debtors.the relief in the form of discharge of debts
Chapter 7 of Bankruptcycannot be availed immediately.
Under chapter 7 of bankruptcy, the process ofThe debtor must fulfill the conditions of
liquidation of debts is supervised by a trustee. Therepayments. Under chapter 13, the debtor is
trustee takes over the assets of the debtor'sprotected from lawsuits, garnishments and other
estate and reduces them into cash. The debtorforms of creditor actions while the repayment
can seek exemption to retain certain types ofplan is under implementation. The discharge of
assets of his property and also the rights of thedebts is also somewhat broader under chapter 13
secured debtors. In most of the cases underthan under chapter 7, in the sense, that more
chapter 7 of bankruptcy, the debtor has little ordebts are cleared off by the repayment plan.
no non-exempt property. Therefore, there mayChapter 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'. Inenterprises the relief through the discharge of
such cases, the creditor with unsecured claimsdebts is provided through an act called
can get back his loan only if he can file a proofReorganization. This is done under chapter 11. The
before the bankruptcy court of the existence ofassets of the debtor under the chapter 11 are
assets, which can be reduced to cash. Since therenot 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 unsecuredto his creditors. This reorganization of repayment
loans. A debtor, if he is an individual, normallyof debt is done through the approval of the court.
receives a discharge within a few months ofA 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 Consumerthe case for bankruptcy.
Protection Act of 2005 amended the BankruptcyHe has also to file a disclosure statement to his
Code so that the individual debtor should pass acreditors containing a detail of his proposal to clear
'means test' to qualify for relief of dischargeoff their loan. The court ultimately approves or
under the chapter 7. If the income of the debtordisapproves the plan of reorganization. If the plan
is higher than a certain level, he may not beis approved and confirmed, the debtor can reduce
eligible for the relief.his loan liability by repaying a part of his obligations
Chapter 13 of Bankruptcyand seek discharge for the other debts.
There is yet another law, which enables the