When a person has too much equity in his home or other property, he shouldn’t file Chapter 7 bankruptcy because his assets may be liquidated to pay the creditors. Under Chapter 13, the filer can keep his property and files a plan to repay the debt over a period of 3 to 5 years; therefore, the assets are not sold to pay for the debt, as what often happens in chapter 7. For both chapters of Bankruptcy, the debtor is assigned a trustee who helps make up a plan to pay off the debt. Once the repayment plan is made, the court either approves the plan or orders changes to the plan. Once the court has approved the plan, the debtor must follow through with it until all has been completed. In Chapter 13, the debtor is assigned a trustee to help manage the accounts and see to it that the borrower follows through with what he has promised to do about his finances. In both cases, the debtor is protected from creditors’ harassment.
It is essential to understand the different chapters of Bankruptcy because some are not the appropriate type of filing for certain individuals. On October 17, 2005, a new law was put into effect called the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which prevents people with high incomes to file chapter 7. Instead, the debtor must file Chapter 13 bankruptcy. In chapter 7, the debtor’s property may be sold to raise some money for the creditors, therefore people who own property will want to avoid this type of filing. One exception to this rule is when a homeowner’s house is homesteaded. That means that no one can touch the home, not even those who want to recoup their losses in a bankruptcy. However, debtors may have to turn over their income to the government. When debts rise, bankruptcy can solve some of the problems people have with too much debt. Learning about filing personal bankruptcy on the Internet can be the first step in that process.