Bankruptcy in the USA
Every year thousands of Americans accumulate more debt than they can pay back. For many, the only way out is to declare Chapter 7 bankruptcy, and have their debts discharged. See the latest statistics on personal bankruptcy filings by state.
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Bankruptcy in the USA
Every year thousands of Americans accumulate more debt than they can pay back. For many, the only way out is to declare bankruptcy, and have their debts discharged.
In 2005, Congress enacted the Bankruptcy Abuse Prevent and Consumer Protection Act, making it more difficult for individuals to file Chapter 7 bankruptcy.
Total personal bankruptcy filings in 2010: 1,538,033.
The Two Types of Personal Bankruptcy
Chapter 7
How it works: Debts not tied to property (credit cards, medical bills, payday loans, utility bills, etc.) can be discharged. Generally best for people who have no/little income, have few assets and meet eligibility requirements. They may have to forfeit bigger assets in exchange for their debts being eliminated.
Average time it takes: 4 months.
Goal: Fresh financial start.
Chapter 13
How it works: Interest-free debt repayment plan made in one monthly payment to a trustee. Can stop foreclosure/repossession during the bankruptcy process. Generally best for people with some consistent income who fell behind and meet eligibility requirements.
Average time it takes: 3 to 5 years.
Goal: Fresh financial start.
Assets That are Not Typically Lost During a Chapter 7 Filing
Each state has exemptions that may allow a debtor to retain a certain amount of value in these categories:
- Home
- Vehicle
- Tools
- Clothes
Most states allow a debtor to retain all
- Prescribed medical equipment
Debts that Typically Can’t be Discharged through Bankruptcy
- Child support
- Criminal fines
- Student loans
- Tax debt