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Bankruptcy law is primarily comprised of the federal statutory
law contained in Title
11 of the United States Code. One of
the primary goals of the bankruptcy laws are to provide debtors
with financial difficulty an opportunity for a fresh start.
In furtherance of this goal, bankruptcy law provides for
the development of a bankruptcy plan that allows a debtor
to resolve his debts through the division of his assets among
his creditors.
This court supervised division provides an orderly manner
for the debtors non-exempt assets to be dispersed among the
creditors with some measure of equality.
It also also provides the debtor with assurance that when
the bankruptcy is discharged they will have a fresh start
free from the financial obligations incurred previous to
the bankruptcy.
The form of the bankruptcy plan will depend on whether
the debtor files a chapter
7 bankruptcy or a chapter
13 bankruptcy. A chapter 7 bankruptcy is a complete liquidation
where all the debtors non-exempt assets are distributed to
creditors and the debtor emerges in a relatively shorts time,
usually under six months, free of the unsecured debts discharged through
the bankruptcy. A chapter 13 bankruptcy is a reorganization
where the debtor forms a plan that lasts from three to five
years during which they make regular payments to bankruptcy
court and pay down a portion of their total unsecured debt.
As the end of this three to five year period the bankruptcy
and all remaining unsecured debt is discharged.
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