There is a way out of debt


Bankruptcy is a legal proceeding in federal bankruptcy court by which a person who has more debts than he or she can pay seeks relief from those debts. The right to file a bankruptcy exists under the law, and this law was designed mainly to take care of serious problems with debts and to allow a fresh financial start.

There are two Chapters of bankruptcy that consumers use. Chapter 7, (commonly called “total” bankruptcy), and Chapter 13, which is a consolidation and repayment program. In Chapter 7 bankruptcy, a Trustee sells the debtor’s property (other than exempt property) and uses the sales proceeds to pay creditors. The result of a successful bankruptcy proceeding is a discharge in bankruptcy, which releases the debtor from payment of affected debts. Chapter 13, which consolidates debt, allows payments to be made for up to 5 years to pay off the consolidated debt. The plan suspends legal and collection actions against the debtor for the period it is in effect, and may also suspend such actions against persons who co-signed loans with the debtor.


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Download the Bankruptcy Packet