Personal Bankruptcy – Liquidation Or Reorganization?

The financial life of the middle class people in America is drowned in debts- more than ever before. Most of their lives run on credit. This may be because of their effort to achieve the better standard of living. Most of them have taken car loans, home loans and even personal loans. Credit card debts also make a major portion of the debts they owe. This is the reason why every year thousands of personal bankruptcy cases are filed in the various bankruptcy courts in the United States. When the debts become too much to be paid off, the only solution left is to file for insolvency. two chapters of bankruptcy code describe the personal liquidation – chapter 7 and chapter 13 bankruptcy. Let us go exploring each of them.

Wage Earner Plan

The wage earner plan is the type of liquidation as described in chapter 13 bankruptcy laws. The reason why this chapter is known as wage earner plan is the fact that it allows the debtor to reorganize their finances. The court granting the chapter 13 bankruptcy to the debtor appoints a trustee to keep an eye on the financial activities of the debtor. The great thing about chapter 13 bankruptcy is that it protects both the debtors and the creditors. Where debtors get a chance to reorganize their financial life, the creditors are ensured that they will get their money back. There can be two types of judgments under the chapter 13 code, depending upon the results of the means test that the debtor is supposed to go through. It is a test in which the debtors’ assets and other source of income are assessed in an effort to figure out how much amount will left to them after paying for their reasonable day to day living expenses. Sometimes, the debtor is supposed to make the full payment of all the debts that they owe. On the other hand, sometimes, the debtors are supposed to pay only a portion of the debt, such as 75 cents on each dollar, etc.

Liquidation Or Straight Bankruptcy

The liquidation is the bankruptcy as defined under the chapter 7 code. As the name suggests, all the assets of the debtor is liquidated by the trustee appointed by the bankruptcy court in order to settle the various claims of the creditors on priority basis. This way, we can see that this type of personal insolvency does not provide the debtor to continue with their business operations, but it does give them freedom from the obligation to repay all the debts.

Thus, the chapter 7 personal liquidation is for those who have lost all hopes to reorganize their finances and repay all the debts, while the chapter 13 is for those who want to carry on with their existing business venture.

As the name suggests, in this type of personal bankruptcy [http://www.legalinfo-online.com/personalbankruptcy.html], all the assets of the debtor is liquidated by the trustee appointed by the bankruptcy court in order to settle the various claims of the creditors on priority basis.

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