Protecting Your Rights And Your Future

There are 2 general types of bankruptcy for consumers

| Jan 13, 2015 | Personal Bankruptcy

Despite the dark predictions that are often put out there regarding bankruptcy as an option to cleaning up a drastic debt situation, the truth is that the positives often outweigh the negatives when a frank evaluation is made. The purpose of the federal statute is to allow qualified persons in Arkansas and elsewhere to either eliminate or reorganize their debt, and then move on to a new start free from prior unmanageable burdens. There are essentially two kinds of bankruptcy, liquidation and reorganization.

Liquidation is embodied by Chapter 7, and reorganization is associated with Chapter 13. Liquidation is generally effective for those who have large amounts of unsecured debt, such as credit cards and medical bills. Theoretically, Chapter 7 liquidation involves the sale of one’s assets and division of the proceeds to one’s creditors. However, under the federal bankruptcy laws, most basic assets are protected by exemptions.

That means that a Chapter 7 debtor can discharge and forever eliminate large sums of credit card and other unsecured debt, and still keep his or her basic consumer property. Exemptions are provided for retirement accounts, cars, furnishings, jewelry, and even a certain amount of cash. The best way to determine whether one’s assets are exempt or not is to consult with an experienced bankruptcy attorney.

In a reorganization, the debtor makes payments back to the creditors in a program designed to get things back up-to-date. This is often done to keep the debtor’s home by paying on the arrearages over a three to five-year monthly payment plan. While those payments are being made the debtor must also make the regular mortgage payments each month.

The specifics of each case are very personal to the details of the person’s particular situation. Because of that case-specific nature of the process, interested individuals or married couples in Arkansas can get a comprehensive initial consultation with a bankruptcy attorney at any time. An analysis will be made and the potential debtors will be given a thorough run-down on the options, rights and ramification of a bankruptcy filing.

Source:, “Bankruptcy may not be as bad as you think”, Bellonora McCallum, Jan. 2, 2015