Thousands of people and businesses file for bankruptcy each year in the United States. Bankruptcy is broken up into several different chapters and the most common chapter is the Chapter 7 liquidation bankruptcy law, which is better known as straight bankruptcy. When people file for Chapter 7 bankruptcy their personal property is sold for cash and then evenly dispersed to the all the collecting creditors. Anyone can file for Chapter 7 bankruptcy including corporations, partnerships, and individuals. To file for Chapter 7 bankruptcy there is a strict set of procedures that someone must follow. The first major step and the most important is to file a petition with the bankruptcy court (Cheeseman, 2006).
There is a new bankruptcy law that is now in effect dealing with Chapters 7 and 13 bankruptcy laws. The old law stated that filers could decide on which type of bankruptcy they wish to file either Chapter 13 repayment or Chapter 7 liquidation of the outstanding debt.
The new law states filers that have a higher income will not be permitted to file for Chapter 7 bankruptcy. The filers will instead have to file Chapter 13 bankruptcy law that requires repayment of least some of their debt (NOLO, 2007).
There are many different reasons people and businesses file bankruptcy. One of the major causes for people to file for bankruptcy is to make all their existing debt to disappear. By filing Chapter 7 bankruptcy they are wiping out their existing debt to start fresh with out any debt. People would rather file bankruptcy rather than foreclosing on their home. If someone can not pay their car bill or other personal property loans they file bankruptcy to prevent their personal items from being repossessed. There are many other reasons people may choose to file bankruptcy to prevent...