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Two basic bankruptcy options are open to consumers

As layoffs continue in different industries nationwide, including in Arkansas, the need for assistance and practical resolutions for consumer debtors continues. There are two consumer bankruptcy solutions available to those who were laid off or otherwise suffered a drop in income or an increase in unanticipated expenses. They are the Chapter 7 bankruptcy and the Chapter 13 bankruptcy.

Chapter 7 is called a "liquidation" or "straight" bankruptcy. In this remedy, a Trustee supervises the proceeding and conducts a meeting during which the Trustee can ask the debtor questions to see that everything is in order. In most situations, the debtor or debtors do not lose any of their belongings in a Chapter 7, because there are ample exemptions provided by law.

Where the debtor is overwhelmed with large amounts of credit card debt and/or medical bills, the Chapter 7 is generally the ideal solution. The unsecured debt is discharged quickly and permanently, and the debtor receives a fresh start with a clean slate. The debtor may also generally keep a home and cars in a Chapter 7 if the accounts concerning such secured loans are paid up-to-date.

Before relying on that general principle, however, consult with a bankruptcy attorney to determine the answers based on your own particular circumstances. Whereas a Chapter 7 is best used by the consumer with large amounts of unsecured credit card debt and the like, the Chapter 13 is most often used by a single or married couple debtor to retain the residential real estate. This is done through a payment plan where monthly payments are made to pay off the arrearages on the mortgage.

In Arkansas and all other federal bankruptcy districts, the plan is drawn up to have the mortgage paid up-to-date at the end of the three to five-year period. At the end, the mortgage will be up-to-date and the bankruptcy concluded. An Order of Discharge for a Chapter 13 will generally discharge all unsecured bills that were listed. The Chapter 13 also allows for the elimination of a second and third mortgage under certain circumstances.

Source: Journalus News Service, "Job Cuts Increase Chapter 7 and Chapter 13 Banruptcy filing", Moises Apsan, Aug. 22, 2014

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