Bankruptcy Protection: Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor.[1] A defaulter can always declare himself bankrupt to acquire assistance from debt. Normally, in bankruptcy cases one can also voluntarily file for it when they are no longer in capacity to pay off debt. The same is accomplished either through a discharge of the debt or through a restructuring of the debt.[2]
Debts & Exemptions
Bankruptcy lawsuits are always filed in United States Bankruptcy Court. However, specifically in respect to exemptions and validity of claims tends to vary on each State law. A Bankruptcy Exemption defines the property a debtor may retain and preserve through bankruptcy. Certain real and personal property can be exempted on “Schedule C” [3] of a debtor’s bankruptcy forms, and effectively be taken outside the debtor’s bankruptcy estate. Bankruptcy exemptions are available only to individuals filing bankruptcy.[4]
There are two alternative systems that can be used to “exempt” property from a bankruptcy estate, federal exemptions[5] (available in some states but not all), and state exemptions (which vary widely between states). For example, Maryland and Virginia, which are adjoining states, have different personal exemption amounts that cannot be seized for payment of debts. This amount is the first $6,000 in property or cash in Maryland,[6] but normally only the first $5,000 in Virginia.[7] State law consequently play the most important role in numerous bankruptcy cases, as such there may be substantial discrepancies in the conclusion process of a bankruptcy lawsuit. The same depends on the on the state in which such cases are filed.
Exemption in Bankruptcy
“When you file Chapter 7 bankruptcy, also known as liquidation bankruptcy, your bankruptcy trustee’s job will be to get creditors fully repaid possible. Your assets and property become part of a bankruptcy estate, with a few exceptions. The trustee has the authority to sell the nonexempt property and distribute the funds to creditors according to their priority level. Exemptions in Chapter 7 determine how much property and which property you can keep. In a Chapter 13 bankruptcy, you can keep your property, but you must reorganize your debts and repay them according to a plan over a 3-5 year period. The amount you must pay certain creditors depends on exemptions, but certain debts must be paid in full, such as priority debts and secured debts.
Non-priority unsecured debts need not be paid back in full. The value of your nonexempt assets determines how much must be paid to non-priority unsecured creditors. This means that your plan payments will be lower each month, but you will have to use nonexempt property to repay creditors.
However, the trustee will not sell your nonexempt assets to repay creditors. Instead, you must pay the portion you cannot exempt to the creditors in order to get your plan confirmed and obtain a discharge. The purpose of this rule is to not leave your creditors worse off for you filing under Chapter 13 rather than Chapter 7.”[8]
To know more on Bankruptcy Protection laws, refer Layman Litigation articles on
[1] https://en.wikipedia.org/wiki/Bankruptcy [2] 11 USC Code, Section 301. [3] "Schedule C- Property Claimed as Exempt" (PDF). Archived from the original (PDF) on 2014-06-10. Retrieved 2014-03-08. [4] "Bankruptcy Exemptions Available to Individuals". Uscourts.gov. Archived from the original on 2014-03-10. Retrieved 2014-03-08. [5] https://www.law.cornell.edu/uscode/text/11/522 [6] "Code of Maryland, Sec. 11–504". General Assembly of Maryland. Archived from the original on 19 October 2017. Retrieved 19 October 2017. [7] "Code of Virginia, Sec. 34-4. Exemption created". Legislative Information System. Commonwealth of Virginia. Archived from the original on 19 October 2017. Retrieved 19 October 2017. [8] https://www.justia.com/bankruptcy/protecting-assets/
