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Bankruptcy is a debt solution that an individual or even a business will resort to when they believe there is no other way for them to meet the obligations of their debt. It a solution that one has to be able to qualify for as there are rules and regulations that have been put in place by the federal law, with two significant sections of this law being applicable to debtors depending on the circumstances. The application for Bankruptcy will have to be made under Chapter 7 or Chapter 13 guidelines. Once the Bankruptcy under either of these chapters has been put into motion by filing, all collection efforts must cease on the part of the debtor's creditors. As soon as possible there is a meeting set up with the individual owing the debt and all the creditors. The debtor then has to show good cause as to why he is not able to pay the monies owed to the creditors. Chapter 7 and Chapter 13 each allows for different financial arrangements.
Chapter 7 is what many individuals will apply for when they are in a financial crisis, and they have no other debt resolution options available to them to which they can turn to. In this case the bankruptcy applicant must be in such a situation where there is no way to be able to pay the majority of the money owed to the creditors. Chapter 7 is different in that the debtor would be able to pay debts that are not secured with any assets, but it would take a longer than normal period of time to achieve this. Usually the time range to clear the debt would fall between 3 to 5 years.
These two chapters have significantly different outcomes as well. For those successful at qualifying for the Chapter 7 bankruptcy, the debtor will have to forfeit all of his assets. The only exception to this would be being allowed to keep those assets required for the basics of daily living. Under Chapter 13 the debtor does not lose any assets.
The decision for qualification for bankruptcy is made by the US Bankruptcy Courts and here it is determined by law if the debtor qualifies for Chapter 7, or their financial circumstances are more applicable to the Chapter 13 application.
Bankruptcy has a lot of serious implications to it, and although one may become debt free it leaves them financially fragile for future attempts to borrow money if the need should arise. Before considering bankruptcy why not fill out our handy request form here at DebtCafe USA and learn about what all your options are.