Bankruptcy is a legally declared situation in which a person is unable to pay debts in good time. There are mainly two chapters in which an individual can file a petition. These are chapters 7 and 13. Chapter 7, also known as the liquidation chapter allows for an appointed trustee to sell off the assets of the debtor and divide the proceeds among the creditors. Once this has been done, the debtor is discharged of any responsibilities towards the lien.
The creditors too are issued with an order that restrains them from making payment demands from the debtor. Under chapter 13, the debtor makes a repayment plan and is allowed to keep the property as long as they can make monthly payments to pay off their debts. In both chapters, the court requires that they go through bankruptcy counseling which is done before and after filling the petition.
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Pre-discharge education enables the debtor to weigh the options available and also to know the disadvantages and advantages of each of the options available and then make informed decisions. Once the debtor has completed the first bankruptcy counseling session and before they can be able to be discharged from any responsibilities towards the debt, they must go through a pre-discharge education. This is helpful as it will ensure that the debtor will be able to handle finances in future.
There is also a chance for the debtor to clearly see where they went wrong previously with their finances. The officer from the agency will help the debtor to make informed decisions on how to handle financial crisis. Insolvency counseling is a good chance for all people who have been faced with economic hurdles to get an education on how to go about financial problems.
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