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Resources - What is Bankruptcy Court?

WHAT IS BANKRUPTCY COURT?

When Filing for Bankruptcy, an Individual or Business Should Always Consult a Professional Bankruptcy Attorney

Bankruptcy is the process of eliminating either a consumer or business debt that is protected under the federal bankruptcy court. Essentially, there are two types of bankruptcy: Chapter 7 and Chapter 13. Each has unique characteristics and can serve specific purposes based on each individual situation. Recognizing the differences is important to understanding exactly what bankruptcy is.

Chapter 7 may be filed by both individuals and businesses and typically lasts about six months. It is also called liquidation bankruptcy because it allows the banks to collect their money by selling the individual’s or company’s assets until the debt is recouped. The banks may also take specific items, such as vehicles and property, if the debt falls under a secured type of debt.

Chapter 13 represents a type bankruptcy requiring repayment. This happens when the debtor can provide a solid source of income that will allow him or her to begin a payment plan over the next five years. The payments will depend on the amount of debt, the amount of monthly income produced, and the type of money that may have been recouped if a Chapter 7 would have been filed.

In the end, no matter what type of bankruptcy an individual or business files, certain debts cannot be eliminated. These typically include spousal debts, such as child support, and some delinquent tax debts. As always, when determining what type of bankruptcy an individual or business qualifies for, it is always important to consultant a professional bankruptcy attorney.