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What You Need to Know about Bankruptcy Law

Filing for bankruptcy is one of the most difficult decisions a person can make. It can leave you feeling overwhelmed and vulnerable. It is essential to understand the laws surrounding bankruptcy before making any decisions. This article will provide an overview of what you need to know about bankruptcy law and include a FAQs section at the end.

Types of Bankruptcy

There are two main types of bankruptcy that individuals can file for: Chapter 7 and Chapter 13.

Chapter 7 bankruptcy is often referred to as “liquidation” bankruptcy. It is the most common form of bankruptcy and allows individuals to discharge most of their unsecured debts, such as credit card debt and medical bills. In order to qualify for Chapter 7, individuals must pass a means test. This test is used to determine whether the individual has enough disposable income to pay their debts.

Chapter 13 bankruptcy is referred to as “reorganization” bankruptcy. It allows individuals to reorganize their debts and repay them over a period of three to five years. This type of bankruptcy is often used by individuals who have a steady income but too much debt.

Eligibility Requirements

In order to be eligible for bankruptcy, individuals must meet certain requirements.

Individuals must have a valid Social Security number and must live in the state in which they are filing for bankruptcy. They must also not have filed for bankruptcy within the last 180 days. Additionally, individuals must complete a credit counseling course prior to filing for bankruptcy and must provide proof of income.

What Is Included in Bankruptcy?

When filing for bankruptcy, all of an individual’s assets and liabilities are included. This includes any real estate, vehicles, bank accounts, and other assets, as well as any credit card debt, medical bills, and other unsecured debts.

Consequences of Bankruptcy

Filing for bankruptcy can have a lasting effect on an individual’s credit score. It can also make it difficult to obtain new credit in the future. Additionally, filing for bankruptcy can be a lengthy and costly process. It can take up to six months to complete and can cost several thousand dollars in attorney fees.

FAQs

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

Chapter 7 bankruptcy is a type of liquidation bankruptcy that allows individuals to discharge most of their unsecured debts, such as credit card debt and medical bills. Chapter 13 bankruptcy is a type of reorganization bankruptcy that allows individuals to reorganize their debts and repay them over a period of three to five years.

What are the eligibility requirements for bankruptcy?

In order to be eligible for bankruptcy, individuals must have a valid Social Security number, must live in the state in which they are filing for bankruptcy, and must not have filed for bankruptcy within the last 180 days. Additionally, individuals must complete a credit counseling course prior to filing for bankruptcy and must provide proof of income.

What are the consequences of filing for bankruptcy?

Conclusion

Filing for bankruptcy can be a difficult decision and it is important to understand the laws surrounding bankruptcy before making any decisions. There are two main types of bankruptcy – Chapter 7 and Chapter 13 – and individuals must meet certain eligibility requirements in order to file. Additionally, filing for bankruptcy can have lasting consequences and can be a lengthy and costly process. If you are considering filing for bankruptcy, it is important to seek the advice of a qualified attorney.

For more information on What You Need to Know about Bankruptcy Law, please visit Nolo.com.