- Of the several bankruptcy options, the most notable are Chapter 7 and Chapter 13. Depending on the financial circumstances of the debtor, one type may be more suitable than the other. Debtors must meet certain requirements to qualify for a particular type of bankruptcy.
A Chapter 7 bankruptcy is a liquidation bankruptcy where the trustee liquidates nonexempt property to pay off as much of the debtor's credit obligations as possible. All unsecured debt that remains after liquidation is usually discharged, and creditors cannot take any further collective action against the debtor. Debts that cannot be discharged in a Chapter 7 include child support, alimony or spousal support, certain taxes and government funded student loans. The Chapter 7 bankruptcy process typically takes three months to six months to complete.
A Chapter 13 bankruptcy allows the debtor to reorganize debts under the instruction of the bankruptcy court. Debtors follow a repayment plan to take care of creditor obligations. Debts not a part of the plan are usually discharged. A Chapter 13 bankruptcy typically takes three years to five years to complete. - Individuals can file for bankruptcy without an attorney, but corporations must retain a lawyer to file. Because the filing process is time-consuming and complex, individuals benefit from the advice of a bankruptcy lawyer to file legal documents. State or local bar associations provide information about hiring a bankruptcy attorney or obtaining free legal services. Bankruptcy courts have procedural information on how to file, including required documents and filing fees. Local law schools may also have resources for advice on eligibility requirements and the necessary steps to file.
- Document preparation services help debtors with bankruptcy paperwork for a fee and help debtors determine what forms are necessary for filing. The preparers type the debtor's personal information on the forms. Document preparation services are an alternative for individuals who cannot afford to hire a bankruptcy attorney. Document preparers are prohibited from giving legal advice. The debtor is solely responsible for the validity of all bankruptcy forms.
- Consumer credit agencies assist debtors who are facing bankruptcy. Organizations such as the American Consumer Credit Counseling Agency provide bankruptcy counseling for individuals who need help determining the best debt relief options for their personal financial situation. Consumer debt agencies also provide alternatives for people who do not qualify for bankruptcy. The goal of debt relief agencies is to educate consumers on the choices available to successfully manage debt.
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