In principle, all assets of a debtor fall into a bankruptcy estate, no matter where it is located on the earth and whether or not it is a protected right. However, due to regulations in federal laws, the debtor possesses wage and homestead exemption. This includes pensions, disability, and insurance benefits, all of which are usually excluded from the bankruptcy process.
In some states, there are also no quantitative limits for residential buildings, so that even million-dollar properties can be seized during bankruptcy. When it comes to an “automatic stay,” claims are no longer permitted by the creditors.
The bankruptcy process is divided according to their rank among creditors:
- Secured creditors
- Primary creditor (distribution costs incurred by the bankruptcy petition consists of liabilities, job claims, tax debts, etc.)
- Unsecured creditors
- Financial penalties, fines, and shareholders
In the last few years, the economic situation in the US has developed negatively. Private insolvency – also called consumer insolvency – gives an over-indebted person the opportunity to free him or herself from their debts. This means that the debtor pays off a portion of their income and loses all debts within 3, 5 or 6 years. It does not matter how high a person’s debts were or how many creditors they had.
The two most important objectives of the private insolvency procedure are the exemption from all debts and an immediate attachment protection. Residual debt relief occurs within:
- 3 years – upon repayment of 35% of the debt and the procedural costs
- 5 years – at the cost of the proceedings
- or 6 years at most – regardless of any debt repayment
After the opening of insolvency proceedings, debtors are completely exempted from their debts. Filing bankruptcy is easier when hiring a professional. This is regardless of how much the debts were, or how many creditors the debtor had at the time the proceedings were initiated.
The second objective – comprehensive pledging protection – is achieved immediately with the start of private insolvency. From the start, individuals do not have to pay attention to the (possible) letter of their creditors. All the annoying letters and phone calls are, thus, omitted.