We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
Personal Bankruptcy: A Comprehensive Guide to Your Legal Rights
Definition & Meaning
Personal bankruptcy is a legal process that allows individuals to eliminate or restructure their debts when they are unable to repay them. This type of bankruptcy primarily involves non-business debts, such as credit cards, medical bills, and personal loans. Individuals can file for personal bankruptcy under two main chapters of the Bankruptcy Code: Chapter 7 and Chapter 13.
In Chapter 7 bankruptcy, a court-appointed trustee liquidates the individual's non-exempt assets to repay creditors. Conversely, Chapter 13 bankruptcy enables individuals to create a repayment plan to pay off their debts over a specified period, typically three to five years, while keeping their assets.
Table of content
Legal Use & context
Personal bankruptcy is primarily used in civil law contexts, specifically in debt relief and financial rehabilitation. It provides a legal framework for individuals to address overwhelming financial obligations and offers a fresh start. Users can manage the bankruptcy process themselves using legal templates from resources like US Legal Forms, which provide guidance on the necessary forms and procedures.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A person with significant credit card debt and medical bills files for Chapter 7 bankruptcy. The court liquidates their non-exempt assets, allowing them to discharge most of their unsecured debts.
Example 2: A homeowner facing foreclosure develops a repayment plan under Chapter 13 bankruptcy to catch up on missed mortgage payments while keeping their home. (hypothetical example)
Relevant laws & statutes
The primary statutes governing personal bankruptcy are found in Title 11 of the United States Code, specifically Chapter 7 and Chapter 13. These laws outline the procedures for filing, the rights of debtors and creditors, and the responsibilities of trustees.
State-by-state differences
State
Chapter 7 Exemptions
Chapter 13 Payment Plan Duration
California
Varies by county; can choose state or federal exemptions
Three to five years
Texas
Homestead exemption is significant; protects equity in primary residence
Three to five years
New York
State exemptions apply; lower limits on personal property
Three to five years
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
Comparison with related terms
Term
Description
Key Differences
Chapter 7 Bankruptcy
Liquidation bankruptcy for individuals
Involves asset liquidation; typically quicker discharge
Chapter 13 Bankruptcy
Reorganization bankruptcy for individuals
Allows debt repayment over time; protects assets
Business Bankruptcy
Bankruptcy filed by businesses
Focuses on business debts and operations; different legal framework
Common misunderstandings
What to do if this term applies to you
If you are struggling with debt and considering personal bankruptcy, follow these steps:
Assess your financial situation and determine if bankruptcy is the right option.
Consult with a financial advisor or legal professional for personalized advice.
Explore US Legal Forms for templates and resources to help you file for bankruptcy.
If your situation is complex, seek professional legal assistance to navigate the process.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.