The Basics

It has been said that debt is modern slavery. With credit card interest rates of 16% to 21%, many people have become indentured servants to the credit card industry.

Often, debt is caused by events beyond the control of the debtor — such as loss of a job, a reduction in work hours, a strike, family illness or injury.

Acknowledging that responsible, honest, hard-working people can run into financial problems, Congress has formulated bankruptcy laws to protect them in situations such as these. If a debtor is permanently burdened with debt, subject to creditor collection efforts and constantly harassed, he or she cannot be a productive member of society.

Further, if an individual is unable to remove the yoke of debt, his or her house will be foreclosed upon, wages garnished, and personal property subject to taking. That person will not be a taxpayer, will not be able to maintain a steady job and will not be able to support his or her family. Congress has determined that, under certain circumstances, this person should be able to make a “fresh start.”

A debtor who chooses to explore relief available under U.S. bankruptcy law should consult a qualified bankruptcy attorney. After evaluating the debtor’s assets, income and necessary expenses, the Attorney can explain the options available.

There are four kinds of bankruptcy proceedings: Chapter 7, Chapter 11, Chapter 12 and Chapter 13. Chapter 11 pertains to businesses, while Chapter 12 is similar to Chapter 13 but applies to family farmers.

The information to follow concerns the two most widely used bankruptcy procedures for individuals: Chapter 7 and Chapter 13