The Different Bankruptcy Rules
There are many different kinds of bankruptcy rules but in the case of the private individual there are two common types of bankruptcy. Private individuals can apply for Chapter 7 or Chapter 13 bankruptcy and since 2005 the bankruptcy rules have changed with the enactment of the federal Bankruptcy Abuse Prevention And Consumer Protection Act that President Bush signed into law in 2005. The bankruptcy rules will differ depending on the type of bankruptcy you choose but since the BAPCAP act was signed into law some of the bankruptcy rules have changed a little but not nearly as much as the law intended them to change.
A Chapter 7 bankruptcy is a liquidation type of bankruptcy where the debtor can file for bankruptcy and his non-exempt property is sold and the assets are used to pay back the creditors. But there are a bunch of bankruptcy rules in the Chapter 7 that make it almost worthless to try. Exempt property is clothes, older vehicles, and anything of small value like that. If you are exceedingly wealthy then you stand to lose a lot in a Chapter 7 but if you are an average American all you would lose is your home. Certain debts like tax liens, student loans, and child support and alimony payments would survive a Chapter 7. So you could file for Chapter 7 and lose almost nothing and still have a lot of your bills left to pay. Looks like the bankruptcy rules make Chapter 7 kind of pointless.
Next Chapter Please
The next common type of bankruptcy is Chapter 13 and this one is also full of bankruptcy rules that make it not a great thing at all. This is the one that sticks with you for at least 10 years because a Chapter 13 bankruptcy is simply a court monitored reorganization of your debts so that you are forced to pay your creditors through court order. A Chapter 13 means that you cannot rebuild your credit through secured credit cards unless the court says so and you will probably not get a loan for a long time to come.
However Chapter 13 does have some beneficial bankruptcy rules. If you file for Chapter 13 then your mortgage cannot be foreclosed on and must be reinstated after the case is resolved. Any co-signers you had for any loans are not required to repay the loan back as they agreed to do when they co-signed the loan. Make sure you understand the bankruptcy rules before you get involved in a bankruptcy.
