Facts About Bankruptcy
Author: Suzy Vanstrusen

Bankruptcy comes in different categories. Each one is
created to specifically correspond to the situation of the
individual who is filing for bankruptcy. In the past years,
a person who wishes to declare bankruptcy can choose on his
own to which bankruptcy category he wants to file for.
Beginning October 17, 1995 however, a new amendment was
approved in the Bankruptcy Law that governs the US.

Today, a person cannot make a decision on his own.
Bankruptcy chapters 7 and 13 particularly are now
accompanied by certain qualifications that the individual
needs to pass. This is called the means calculation. In
this test, the expenses will be subtracted from the monthly
income of the individual. The result will then be
multiplied by 60 (a fixed number) in order to determine
whether he or she will be eligible for a Chapter 7 or
Chapter 13 bankruptcy.

Chapter 7 bankruptcy gives the individual freedom from all
charges in his account. This is discharging a person
completely from all the debts he has. If the result of your
means test calculation shows that you will not be capable
to pay off your debts, then you will be qualified to
declare Chapter 7 bankruptcy.

If your means test calculation results to at least $6,000
and above, you are then ordered to file for Chapter 13
bankruptcy. Under Chapter 13, you are required by the law
to pay your debts by submitting at least 10% of your
monthly salary. However, you are allowed to maintain
ownership of your properties.

Other kinds of bankruptcy are the Chapter 9, 11 and 12
bankruptcies. Chapter 9 is a bankruptcy provision intended
for municipalities or public agencies. This can be
considered as the most complicated category since it
involves a large group of people.

Chapter 11 is a bankruptcy proceeding done by business
corporations. No bankruptcy trustee will be designate to
decide on a Chapter 11 case. Here, the corporation that
filed for bankruptcy will create a recovery plan on its own.

Chapter 12 bankruptcy is for family farmers and fishermen.
Filing for a Chapter 12 bankruptcy protects a farmer or a
fisherman from losing his assets to his creditors. Instead,
he will only be required to pay his debts through his
earnings.

Generally, the new bankruptcy law requires everyone to
undergo credit counseling under a credit counseling agency
accredited by the government. This must be done at least
six months before they file for bankruptcy. The credit
counseling agency will take a look at the individual's debt
problem and try to find solutions other than bankruptcy. If
the credit counseling agency recommends filing for
bankruptcy, that's the only time the application can be
started.

The individual should then find a bankruptcy attorney who
will prepare the bankruptcy documents and who will be
representing him in the bankruptcy court. After bankruptcy
has been filed, the bankruptcy judge will be the one to
seal the approval for the discharge.


About the Author:

Suzy Vanstrusen is a credit analyst and a writer of the
website http://www.ezcreditrepairsolutions.com/ and has
been providing consumers with tips and tricks in repairing
your credit. Check the site for more free credit repair
tips and credit repair services.