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What You Should Know About Consumer Bankruptcy

Bankruptcy can be a powerful tool to gain relief from your debts. But, it can be a complicated process and should not be engaged in lightly.

The purpose of a consumer bankruptcy is to provide the debtor with a "fresh start." This "fresh start" is intended as a means of allowing individuals who have become mired in debt to free themselves from that debt and engage in newly productive lives unimpaired by their past financial problems.

Generally, there are two types of consumer bankruptcies. In the first, often referred to as Chapter 7, all of the debtor's nonexempt assets are converted to cash and distributed to creditors according to certain statutory rules. At the end of the proceeding, the debtor receives a discharge, which relieves him or her from any responsibility to pay most debts and prohibits creditors from making further attempts to collect those debts.

The second kind of bankruptcy is frequently referred to as a Chapter 13 bankruptcy.

Here, the debtor proposes a plan to repay some or all of his or her outstanding debts. A Chapter 13 bankruptcy usually is better for consumer debtors. Unlike a Chapter 7 bankruptcy, usually all or most of the debtor's property is protected. At the end of the Chapter 13 bankruptcy the debtor, with certain exceptions, generally is no longer personally liable on most debts. Before deciding whether or not to file a bankruptcy and what bankruptcy to file, you should be carefully counseled by an attorney.

If you would like more information about Consumer Bankruptcy, please contact us by using this site's e-mail or calling 612.339.4295.

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