Bankruptcy And Debts

Many times the subject of bankruptcy seems baffling in its complexity. Actually the basic principals of bankruptcy are fairly simple even though the federal statuses on bankruptcy are extensive. The reason that the statutes are so complex is because in as effort at social engineering, the lawmakers want to cover every possible contingency. The very complexity of the Bankruptcy Code gives the lawyers ample opportunity to try to obtain interpretation of the law which best serves their clients interest. This results in extensive litigation and occasionally in interpretations of the Code which were not what legislature intended. This on turn results in additional legislation, which results in additional litigation and on and on. Nevertheless, the underlying principals are not as complex as the Code makes them seem. Here we will discuss the personal nature of bankruptcy.

Consolidation Debt Mortgage The concept of bankruptcy is an old one in the English common law. If a person could not pay his debts, his creditors hauled him into court, took all of his assets, and used those assets to satisfy their debts. If the assets were insufficient to satisfy the debts, the debtor was taken from the bankruptcy court to debtors' prison. Since this is a rather extreme remedy, Article 1 Section 8 of the U.S. Constitution gives the Congress the right to establish "?.uniform Laws on the subject of Bankruptcies throughout the United States."

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments, offs, and debt collection activities. Both also provide exemptions that allow people to keep certain assets, although exemption amounts vary among states. Note that personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. And unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or lien on it.

Consolidation Debt Help As the popularity of debtors' prison declined, the concept of giving the debtor a fresh start became one of the primary purposes of the bankruptcy process. It is important to remember that a bankruptcy is a personal action which at time of discharge gives the petitioner (formerly the debtor) a fresh start. The property owned by the petitioner does not get the fresh start, the individual does.

Any individual who files for bankruptcy can file for bankruptcy exemptions. Exemptions are available for chapter 7 and chapter 13 bankruptcy filings, but the exemptions vary from state to state. Do All States Have the Same Exemptions No. Federal Bankruptcy law gives discretion to each state to determine which assets a debtor is allowed to keep when a bankruptcy case is filed. A state can allow a debtor to choose between federally created exemptions, defined in 11 U.S.C. 522 (see federal exemptions), or state created exemptions, or a state can opt to allow a debtor to choose only the state created exemptions. A debtor is allowed to use the exemptions from only one statute, either the federal or the state, but not both. For states that provide more than one exemption statute or system, the debtor is allowed to use the exemptions from only one statute.

Consolidation Credit Debt The fact that bankruptcy is a personal action may shed some light on the effect of a homestead exemption in a bankruptcy proceeding. The bankruptcy code acknowledges the validity of homestead exemption. A homestead exemption is a personal exemption which, in an effort to preserve a person's home, protects a certain amount of an individual's equity in the homestead property. State law determines the extent and effect of a homestead exemption. Thus, if state law says that a person can declare a homestead up to $45,000 and if there is less than $45,000 equity in the property, that equity in the property is protected by the homestead exemption. This principal operates without regard to the Federal Bankruptcy Code.

The Bankruptcy Courts Survey 2005 found that communication between the courts, official receivers and bankruptcy trustees was generally efficient. Cause for bankruptcy were seen to be complex, although credit misuse followed by business failure tended to be a familiar pattern. Bankrupts tended to acknowledge moral responsibility for their debts, the report found. "The report concludes that very few people see bankruptcy as an easy way out of their debts but rather that they have no real alternative, " said Desmond Flynn, inspector general of the Insolvency Service.

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