Saturday, August 29, 2009
HOW DOES BANKRUPTCY PROTECTION REALLY WORKS
In some places of United States a debtor can opt for bankruptcy protection services. It is legal procedure which can also prove to be a good alternative to usual bankruptcy proceedings. So that a person can gather some idea about the debts that are going to be discharged or whether the debts can be discharged or not.The cost incurred while filing bankruptcy should also be considered and to be compared with advantages received. Because the disgrace of filing bankruptcy continues for a long time between seven to ten years and during this time there can be lot of financial stress as credit will not be easily available. So it is always advisable to enter into a bankruptcy evaluation program to judge whether bankruptcy is the only available option.
In bankruptcy protection the term "protection" means the amount of debts discharged form the total number of debts due. Before the discharge, the possessions of the default debtors are sold of and the amount collected from the sell proceedings are used to pay the debts.
As per the bankruptcy Federal Law there are two types of bankruptcy protection available to the debtor and they are Chapter 7 and Chapter 13.
Chapter 7 is also called straight bankruptcy. Here a trustee is appointed by the court who takes over all the assets of the debtor. The trustee then sold the assets and the amount received after liquidation is used for Chapter 7 bankruptcy proceedings.
In Chapter 13, a repayment plan is prepared and the debtor has to make payments according to the repayment plan that is proposed and accepted.
This is how bankruptcy protection really works.
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