Chapter 7 and chapter 13 of the Bankruptcy Code deal with bankruptcies. Chapter 7 of the Bankruptcy Code deals with liquidation of the remaining assets of a debtor. It can be availed by a person when all his non-exempt properties are sold for the purpose of making repayments to his creditors. Property exemptions that come under this chapter will allow the debtor to keep some properties that include some real estate, cloths, and tools of trade ad food. These articles mentioned under chapter 7 will normally be exempted from the purview of the liquidation proceedings.
Both debtors and creditors are allowed to file a bankruptcy suit before a court of law under the Bankruptcy Code. The bankruptcy suit that comes from the part of the debtor voluntarily is known as voluntary bankruptcy procedure. When it comes from the creditors against the will of the debtor it will be called involuntary bankruptcy procedure. Involuntary bankruptcy procedure reserves a right for the debtor to file his objections against the bankruptcy suit moved by the creditors before the court.
Once set in motion the bankruptcy procedures will protect the debtor from the actions taken by the creditors against him. During the tendency of the bankruptcy suit, the court will not allow the debtors to make any move that intends to recover their debts from the creditor. This automatic stay will continue in force until the court passes a final verdict on the bankruptcy case pending before it.
Those who file a voluntary bankruptcy suit before the court of law should file a statement with regard the properties that he owns. This statement filed by the petitioner should contain the details of his present income and expenditure. It should also contain the details of the financial affairs of the person who makes an application for personal bankruptcy.
A trustee appointed by the court will then take care of the liquidation process. He liquidates the remaining assets of the debtor in accordance with instructions given by the court. The amount realized from the auction of the property of the debtor will be used by the court to settle the financial problems of the debtor.
Normally a person who has initiated personal bankruptcy procedure will be able to get out of the debts that he owes to his creditors when the procedure comes to an end. He will be absolved from all his liabilities by the court of law through the liquidation process. But the financial liabilities of the applicant arisen out of his willful or malicious acts will remain unresolved even after the bankruptcy procedures. The federal and state taxes and the debts that he had obtain just before he files his bankruptcy suit will come under this category.
Chapter 13 of the Bankruptcy Code enables a debtor to retain all his properties on production of the loan repayment plans made by him. A debtor can avoid liquidation process by using the provisions contained in this chapter. It is the discretion of the court to decide whether the repayment plan produced by the petitioner before the court is to be accepted or not.
Written by Matthieu Laporte of aidesurendettement.com.
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