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History and Chapters of Bankruptcy

A bankruptcy law suit aims at helpingThere is yet another law, which enables
the debt ridden citizen or anthe debtor to keep his valuable assets
organization to be relieved from thesuch as house under chapter 13. It
pressures of the existing debts. Theallows the debtor to propose a plan to
goal is achieved by providing the debtorpay off the creditors over a period of
a bankruptcy discharge, which releasesthree to five years. This provision
him from the personal liability fromcomes in handy for the debtors who
certain specific debts. It alsocannot 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 bankruptcyconfirmed by the court, he can make the
laws that provide debt relief orpayment to his creditors through the
discharge in form of debt liquidation totrustee of the court and save his asset.
the debtors.The only thing is that unlike in chapter
Chapter 7 of Bankruptcy7, the relief in the form of discharge
Under chapter 7 of bankruptcy, theof debts cannot be availed immediately.
process of liquidation of debts isThe debtor must fulfill the conditions
supervised by a trustee. The trusteeof repayments. Under chapter 13, the
takes over the assets of the debtor'sdebtor is protected from lawsuits,
estate and reduces them into cash. Thegarnishments and other forms of creditor
debtor can seek exemption to retainactions while the repayment plan is
certain types of assets of his propertyunder implementation. The discharge of
and also the rights of the secureddebts is also somewhat broader under
debtors. In most of the cases underchapter 13 than under chapter 7, in the
chapter 7 of bankruptcy, the debtor hassense, that more debts are cleared off
little or no non-exempt property.by the repayment plan.
Therefore, there may not be anyChapter 11 of Bankruptcy
liquidation of the debtor's assets.In case of organization and commercial
These cases are also called as 'no-assetenterprises the relief through the
cases'. In such cases, the creditor withdischarge of debts is provided through
unsecured claims can get back his loanan act called Reorganization. This is
only if he can file a proof before thedone under chapter 11. The assets of the
bankruptcy court of the existence ofdebtor 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 assetshis business. In this way, he can also
left with the debtor, he gets awaymake 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 aA debtor, under chapter 11, has to make
few months of putting up his applicationhis proposal for repayment within 120
for such relief.days of filing the case for bankruptcy.
A Bankruptcy Abuse Prevention andHe has also to file a disclosure
Consumer Protection Act of 2005 amendedstatement to his creditors containing a
the Bankruptcy Code so that thedetail of his proposal to clear off
individual debtor should pass a 'meanstheir loan. The court ultimately
test' to qualify for relief of dischargeapproves or disapproves the plan of
under the chapter 7. If the income ofreorganization. If the plan is approved
the debtor is higher than a certainand confirmed, the debtor can reduce his
level, he may not be eligible for theloan liability by repaying a part of his
relief.obligations and seek discharge for the
Chapter 13 of Bankruptcyother debts.



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