In bankruptcy, a proof of claim is a form creditors file to prove that they have a valid claim against the bankruptcy estate. Before a creditor can get paid through your bankruptcy, it must file a proof of claim with the court.Bankruptcy law provides two basic forms of relief: (1) liquidation and (2) rehabilitation, also known as reorganization. Most bankruptcies filed in the United States involve liquidation, which is governed by Chapter 7 of the Bankruptcy Code. In a Chapter 7 liquidation case, a bankruptcy trustee collects the debtor’s non-exempt property and converts it into cash for the benefit of unsecured creditors. If the property is exempt or encumbered to the point of having no equity beyond the amount of the exemption, the trustee will abandon the asset. An abandonment means that the bankruptcy estate will not sell the asset or otherwise take an interest in the asset.
In a rehabilitation or reorganization creditors may be provided with a better opportunity to recoup what they are owed. Chapter 11 or Chapter 13 of the Bankruptcy Code governs this type of bankruptcy. Chapter 11 usually applies to individual debtors with excessive or complex debts, or to large commercial entities like corporations. Chapter 13 usually applies to individual consumers and to some small businesses with debts that fit within the boundaries of Chapter 13. Reorganization provides a greater opportunity to retain assets if the debtor agrees to pay off debts according to a plan approved by the bankruptcy court. If the debtor fails to do so, however, the court may order liquidation.Most Chapter 7 cases take from four to six months to complete. It might take longer if any number of things happen, such as: you need to provide more information or documents.You can file for bankruptcy twice or even three times, even if you have received a discharge. The key is that you will often have to wait a certain period after you have filed and have received a discharge, to file for bankruptcy again and get a full discharge.It starts with compiling all your financial records – debts, assets, income, expenses – and listing them. This not only gives you a better understanding of your situation, but also gives anyone helping you (and eventually the court) a better understanding.
The next step is to receive credit counseling within 180 days before filing your case. This is required step. You must obtain counseling from an approved provider listed on the United States Courts website. Most counseling agencies offer this service online or over the phone.
The courts want you to do this to make sure you have exhausted all possibilities of finding a different way to handle your problem. It’s important to understand that credit counseling is required. You will receive a certificate of completion from the course and this must be part of the paperwork when you declare bankruptcy, or your filing will be rejected.
Next, you file the petition for bankruptcy. If you haven’t done so at this point, this might be where you realize you need to find a bankruptcy lawyer. Legal counsel is not a requirement for individuals filing for either Chapter 7 or Chapter 13 bankruptcy, but you are taking a serious risk if you choose to represent yourself.Most Chapter 13 plans must be three to five years long – so a chapter 13 bankruptcy can last up to five years. But how long your repayment plan will last depends on: your income, and. the amount of time you need to pay off the debts included in your planLiquidation bankruptcy takes its name from this principle because it is designed to convert the debtor’s property into cash, which is then used to repay creditors. In exchange, most or all of the liquidation bankruptcy filer’s debts are discharged (wiped out). Thus, assets that can be liquidated may be those in which equity is had, or those that are not exempt from liquidation. The two types of personal bankruptcy affect your credit differently. In both cases, bankruptcy creates a negative item on your credit report. However, the time this negative item remains differs between the two Chapters:
Chapter 13 bankruptcy credit report penalty: Lasts seven years from the date of final discharge
Chapter 7 bankruptcy credit report penalty: Lasts ten years from the date of final discharge
The effect of these penalties on your credit score can vary. If you have a high score, then bankruptcy tends to have a greater impact. The point-decrease is often less with a lower score, because you have less room to fall.A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code.The Chapter 13 process requires that the debtor (that’s what we call the person who files the bankruptcy case) make a monthly payment to a Chapter 13 Trustee for a period of 36 to 60 months. The Trustee then distributes that money to the debtor’s creditors who have filed proper claimsNot necessarily. If you’re facing serious debt problems, filing for bankruptcy can be a powerful remedy. … It also eliminates many types of debt, including credit card balances, medical bills, personal loans, and more. But it doesn’t stop all creditors, and it doesn’t wipe out all obligations.
Generally, taxes, student loans, child support and alimony, or recent credit card debts are examples of debts which may not be eliminated. Lien stripping is the process of eliminating junior liens during Chapter 13 bankruptcy. It allows a bankruptcy filer who is “upside down” on his or her house to wipe out liens on a parcel of real property that are wholly unsecured.