Bankruptcy is the legal mechanism that prevents good, honest citizens from being permanently impoverished by insurmountable debts. It also is our nation’s “pressure valve” that is intended to prevent political disasters that can result from the economic oppression of common people by monied elites in high places. In spite of the new bankruptcy law passed in 2005, bankruptcy relief still is just as obtainable as it was before.
By filing for bankruptcy protection, a citizen is granted immediate relief from all tactics of harrassment and the creditors are immediately forbidden to continue any collection activities. In the end, most debtors are allowed to keep all items of personal property. However, if the debor chooses to retain possession of a house, car or other item that is subject to a “mortgage” then the debtor will need to continue making payments on those particular debts. Otherwise, the debtor can give back the house or car, etc., and walk away completely free of all further obligations.
There are two kinds of bankruptcy procedures that concern most ordinary debtors. Those are Chapter 7 and Chapter 13 bankruptcies.
Chapter 7 bankruptcies provide immediate protection from all creditors and all collection activities must immediately stop. In the end, the debtor obtains total freedom from all “dischargeable” debts. All debts are dischargeable except some taxes, student loans, child and spousal support obligations, and debts that have resulted from some kind of fraud or crime. A Chapter 7 bankruptcy normally lasts less than four months and the debtor need not make any further payments toward any dischargeable debts. The Chapter 7 bankruptcy is the fastest and most cost effective form of bankruptcy protection for ordinary debtors.
The Chapter 13 bankruptcy is intended for higher income persons with sufficient extra income to make some partial payment of their debts. This form of bankruptcy normally costs more to obtain and requires the debtor to make payments for three to five years. By filing for Chapter 13 bankruptcy protection, a citizen also is granted immediate relief from all tactics of harassment and the creditors are immediately forbidden to continue any collection activities. At the end of the required payments, the debtor is granted complete freedom from all dischargeable debts.