Chapters Of Bankruptcy In The United States

875 Words 4 Pages
Bankruptcies laws date all the way back 1789 when the Constitution of the United States was signed. The Constitution has a Clause in Article I, Section 8 which states “the Congress shall have the power to…establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States” (“US Constitution Article I.”). Each state can create and enact laws that govern the contracts that are created by consumers and sellers. States are able to control the contracts that arise between consumers and cell phone companies, utility companies, and other services. The Federal government has enacted five different Chapters of bankruptcy, Chapter 7, Chapter 9, Chapter 11, Chapter 12, and Chapter 13. Chapters 9, 11, …show more content…
Chapter 7 bankruptcy is an option for individuals and businesses as long as they meet certain criteria. To qualify for Chapter 7, an individual must calculate their monthly income, based on the last six calendar months. “If your current monthly income is less than the median income for a household of your size in your state, you pass. Period. You 're done. You do not need to complete the rest of the means test” ("The Bankruptcy Means Test…). If an individual’s income is higher than the median income for a household of similar size in the same state, filing for Chapter 7 bankruptcy becomes much harder. To qualify, an individual must calculate their “disposable income.” “Disposable income” is what part of an individual’s income is left after paying allowed monthly expenses, which is “a portion of your unsecured debts (such as credit card bills)” ("The Bankruptcy Means Test…). If one’s disposable income is above a certain amount, which varies from state to state because of the median income. If an individual passes the means test, they are able to file for chapter 7 …show more content…
Before beginning the filing proceedings, it is critical to examine state laws and determine what property is not eligible to be included in the bankruptcy case (Renauer). In Massachusetts, homesteads are exempt from bankruptcies filings up to $100,00 and this amount cannot be doubled if filing jointly (“Massachusetts Bankruptcy Laws”). This means that an individual is able to keep up to $100,000 worth of their home. After determining the exempt property, individuals need to determine what to do with their secured debt such as homes and vehicles. Individuals are able to redeem, reaffirm, or surrender the collateral that they put up for the secured debt. If one chooses to redeem they pay the creditor the current value of the property. If they choose to reaffirm the debt, they “agree on new contract terms with the creditor” (Renauer). The last option is to surrender the property which means the debtor gives the property to the creditor. The nest step in the filing process is to complete and file the form. A debtor must file a petition to cancel their debt with the courts along with a $245 case filing fee and an administrative fee of $75 ("Chapter 7 - Bankruptcy Basics."). After 21 to 450 days after the filing, a trustee holds a meeting with the debtor and the creditors. At this meeting, the debtor is questioned, under oath, about the validity of the information that they

Related Documents

Related Topics