When seeking bankruptcy relief there are different regulations that apply depending on whether it is an individual or a business that is seeking relief (note there are regulations that go beyond just individuals or businesses). In today’s post, we will concentrate on those regulations that affect individuals. The regulations are enshrined in legislation that the courts have, over time, applied interpretations to. The legislation is broken into chapters hence you will hear references made to a Chapter 7 bankruptcy process or a Chapter 13 and so on.

Individuals seeking relief from bankruptcy will normally apply under either a Chapter 7 or Chapter 13 discharge. These two chapters deal with individuals in totally different ways. The following is a brief review of each of these Chapters – I will deal with them more fully in future posts.

Chapter 7 Bankruptcy Application

A Chapter 7 application for bankruptcy is undertaken when there is no possible chance of any debts being repaid. Under a Chapter 7 application, assets, apart from those deemed to be exempt, are liquidated and the funds distributed to creditors. Chapter 7 applicants can often be discharged within a few months of lodging an application. Chapter 7 applications are subject to a means test. If you fail the means test you will need to seek help through a Chapter 13 application.

Chapter 13 Bankruptcy Application

A Chapter 13 application for bankruptcy is normally undertaken by those who are still in employment and receiving a regular income. Under a Chapter 13 application, an arrangement is entered into to repay the debt over a certain period of time, normally 3-5 years. If you have tried to come to an arrangement and found that approach rejected by the creditor, don’t be disheartened. The Bankruptcy Court may well approve that arrangement if you can demonstrate that it is appropriate.

The biggest difference between a Chapter 7 and a Chapter 13 is that the debtor is allowed to keep their assets under a Chapter 13 application. This can be important if a major asset like your home is involved. We discuss these two Chapters in depth in a later post.

Related posts:

  1. Seeking Undue Hardship In Bankruptcy
  2. Bankruptcy Law – Granting A Creditor Relief From A Stay
  3. Bankruptcy Law – What Is A Motion For Relief From A Stay?
  4. What Is The Means Test And What Information Must I Reveal?