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Know bankruptcy basics before filing for a fresh financial start

For a person who is looking into bankruptcy, sorting through a lot of the information can be rather challenging. Learning some of the basics of the bankruptcy process can make the decision-making and filing a little bit easier. Florida residents might like to know about some bankruptcy basics, so they can determine whether or not to file for this protection.

Consumer bankruptcy enables a person to either establish a repayment plan for debts through the court or to have unsecured debts completely discharged. The main difference between the two types is whether you get to keep your personal property.

Chapter 13 bankruptcies allow most consumers to keep personal property. A person who is eligible for Chapter 13 bankruptcy must have regular income. Part of that income must be used to repay debts according to the court's order. A trustee is placed over the bankruptcy to collect payments, ensure you pay according to the court order and ensure that creditors are paid.

Chapter 7 bankruptcies liquidate personal property to pay debts. Some personal property might be exempt from liquidation. A trustee is placed over the sale of the non-exempt personal property.

In both forms of bankruptcy, it might be possible to keep your home or vehicle by reaffirming the debt. A reaffirmed debt must be approved by the court. The reaffirmation mustn't place an undue burden on you, it must be voluntary, and it must be in your best interest in order for the court to approve it. Reaffirmations may be canceled within 60 days of filing them and must be followed properly or the creditor may take action to reclaim the property.

There are several debts that generally aren't able to be relieved through the bankruptcy process. These include debts incurred after the bankruptcy filing date, certain personal injury judgments, student loans, taxes, alimony, child support, criminal restitution and court fines.

If you are in debt and need to use bankruptcy to gain a fresh financial start, seeking the help of a professional can help you to understand your rights and responsibilities as you go through the bankruptcy process.

Source: CBS Boston, "Personal Bankruptcy, The Basics" No author given, Jan. 06, 2014

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