Commercial Law ID: 408615218

May 11, 2022 Name: 何日明

Homework 2

1. Wage-earner bankruptcy

(1) What it is
Applies only to individuals (no corporations or partnerships) with debtnot
exceeding about $1.3 million.This permits an individual with regular income
to establish arepayment plan, usually either a composition (an agreement
amongcreditors) or an extension (a stretch-out of the time for paying the
entire debt)

(2) Who qualifies?

The courts

(3) How it works

 It allows individuals—as well as businesses, with consistent income—to
create workable debt repayment plans. The repayment plans are commonly
in installments over the course of a three- to five-year period. In exchange
for repaying their creditors, the courts allow these debtors to keep all of their
property, including otherwise nonexempt property. 7

(4) Advantages
 You can repay your creditors over a longer period of time. If you are
behind on your current bills, this will give you time to increase your
income, and change your spending habits.
 The amount of debts that you owe can be reduced. In some instances,
you will not be required to pay the full amount of the debt that you
owe. Once you have fulfilled the terms of your repayment plan,
creditors are not entitled to receive the full amount of the money that
was owed to them.
 You can stop the effects of defaults and missed payments on your
credit report. If you are behind on your financial obligations, filing
Chapter 13 bankruptcy is an effective tool to help you structure a plan
to pay back your debts in a timely manner.
 Chapter 13 allows you to keep your property as long as you are
 making payments. This is a good program for people who are behind
on their mortgage and other secured debt.

(5) Disadvantages
 Chapter 13 bankruptcy stays on your credit report for approximately 7
years. During this time you can work to rebuild your credit.
 Chapter 13 bankruptcy does not eliminate certain kinds of debts.
Some debts that are still owed after your Chapter 13 bankruptcy are
student loans, child support, and spousal support.
 It will take approximately 3-5 years to repay your debt. Filing
Chapter 13 bankruptcy requires you to make a long-term commitment
to the process.

2. Straight bankruptcy

(1) What it is
applies to all debtors except railroads, insurance companies, most banks and
credit unions, and homestead-A liquidation is a “straight” bankruptcy
proceeding. -It entails selling the debtor’s nonexempt assets for cash and
distributing the cash to the creditors, thereby discharging the insolvent person
or business from any further liability for the debt. -About 70 percent of all
bankruptcy filings are Chapter 7.

(2) Who qualifies?

A trustee

(3) How it works

A chapter 7 bankruptcy case does not involve the filing of a plan of
repayment as in chapter 13. Instead, the bankruptcy trustee gathers and sells
the debtor's nonexempt assets and uses the proceeds of such assets to pay
holders of claims (creditors) in accordance with the provisions of the
Bankruptcy Code. Part of the debtor's property may be subject to liens and
mortgages that pledge the property to other creditors. In addition, the
Bankruptcy Code will allow the debtor to keep certain "exempt" property;
 but a trustee will liquidate the debtor's remaining assets. Accordingly,
potential debtors should realize that the filing of a petition under chapter 7
may result in the loss of property.

(4) Advantages

 Immediate relief in the form of a much-needed breathing spell.

 Permanent debt relief in the form of a bankruptcy discharge. 

 Getting your bankruptcy discharge is virtually guaranteed.
 You’ll probably get to keep all of your stuff.
 If you want, you can even keep your car after filing bankruptcy.
 After filing bankruptcy, missed monthly payments and other negative marks
on your credit report no longer hurt your credit score.

 You'll have better access to credit and banking.

(5) Disadvantages

 You can’t file Chapter 7 if you make too much money.

 If you have good credit, it will likely take a temporary hit.
 It doesn't erase all unsecured debts.
 You can lose certain types of property.
 Your Chapter 7 bankruptcy filing doesn't protect others.