What are some important laws of bankruptcy?


Quick Answer

Important laws of bankruptcy include the ability for an individual to file for a Chapter 7 or Chapter 13 bankruptcy, Money Crashers explains. Both types of bankruptcy involve providing a financial inventory, attending a creditors' meeting, receiving credit counseling during bankruptcy and completing post-bankruptcy credit counseling. The majority of bankruptcy cases are handled through paperwork and don't generally require court attendance. Whether an individual qualifies depends in part on his previous filing history, FindLaw notes.

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Full Answer

Before an individual can file for bankruptcy, he must create a financial inventory that outlines his income, debts, expenses and other assets, Money Crashers explains. He must complete credit counseling with a court-approved counselor and attend a creditors' meeting to discuss the exact terms of debt's discharge and reorganization. Once the parties agree on the terms, the debtor must attend credit counseling again to prevent any future bankruptcy filings.

The type of bankruptcy the debtor files depends on his situation, according to FindLaw. Chapter 7 bankruptcy is known as liquidation bankruptcy, because it generally requires the debtor to liquidate his assets in order to pay off debt. The remaining debt is discharged. The laws for Chapter 7, which determine who qualifies for this type of bankruptcy and how to file, vary by state. Chapter 13 is referred to as reorganization bankruptcy, as it mandates the debtor follow a structured repayment plan in order to pay off debts over time, generally three to five years.

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