Filing for bankruptcy can be a great way to get out of debt or create a plan to pay it off. It's a legal process that begins when a debtor files a petition with the bankruptcy court. Depending on the type of bankruptcy, the debtor may be able to keep all of their assets or have to liquidate them to pay off their debts. Chapter 7 is a liquidation bankruptcy, but in more than 90% of all consumer bankruptcy cases in the United States, filers can keep all of their assets.
Chapter 11 is mainly used by companies and allows them to continue operating their business while their creditors and the court approve a plan to pay off their debts. Before filing for bankruptcy, individuals must take a credit counseling course within 6 months prior to filing their application in court. They can choose between a federal list of exemptions and the list of exemptions provided for in the law of the state in which they file the bankruptcy case, unless the state has enacted a law that prohibits them from choosing exemptions from the federal list. The United States Bankruptcy Court (units of the United States district courts) handles bankruptcy cases and federal law governs the procedure in these cases.
The bankruptcy administrator assigned to each case will organize a creditors' meeting, also known as meeting 341, after the section of the bankruptcy code where it is mandatory. If you're considering filing for bankruptcy, it's important to understand all of your options and what the process entails. Bankruptcy laws help people who can no longer pay their creditors start from scratch by liquidating their assets or creating a payment plan. Use the forms that are numbered in the 100 series to file bankruptcy for individuals or married couples.