Personal Bankruptcy Laws and Procedures

Personal Bankruptcy

Overview

• Personal bankruptcy is a legal process that allows individuals to eliminate or restructure their debts when they are unable to pay them.
• It provides a fresh start for individuals who are overwhelmed by debt.

Types of Personal Bankruptcy

• Chapter 7 Bankruptcy:
  • Liquidation bankruptcy
  • Trustee sells non-exempt assets to pay creditors
  • Most debts are discharged
  • Typically takes 4-6 months
• Chapter 13 Bankruptcy:
  • Reorganization bankruptcy
  • Debtor creates a plan to repay debts over 3-5 years
  • Debtor retains assets
  • At the end of the plan, remaining debts are discharged

Eligibility for Personal Bankruptcy

• Chapter 7:
  • Individuals with primarily consumer debt
  • Income below the median income for their state
  • Pass the means test
• Chapter 13:
  • Individuals with a regular income
  • Debt less than $1,257,850 (secured) and $419,275 (unsecured)
  • Have not had a Chapter 13 discharge in the last 2 years

Exemptions in Personal Bankruptcy

• Exempt assets: Assets that are protected from creditors
• Non-exempt assets: Assets that can be sold to pay creditors
• Examples of exempt assets:
  • Primary residence (up to a certain value)
  • Retirement accounts
  • Vehicles (up to a certain value)
  • Household goods and furnishings

Credit Counseling and Debtor Education

• Credit counseling: Required before filing for bankruptcy
• Debtor education: Required after filing for bankruptcy
• Both courses are designed to help individuals manage their finances and avoid future debt

Discharge in Personal Bankruptcy

• Discharge: A court order that releases the debtor from personal liability for debts
• Types of debts that can be discharged:
  • Credit card debt
  • Medical debt
  • Loans
  • Utility bills
• Types of debts that cannot be discharged:
  • Tax debt
  • Student loans
  • Child support and alimony
  • Criminal fines and restitution

This quiz covers the concepts of personal bankruptcy, including types of bankruptcy, eligibility, exemptions, credit counseling, and discharge. It is designed to test your understanding of the legal process and procedures involved in personal bankruptcy.