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What is Bankruptcy?

Bankruptcy is a proceeding in a federal court in which an insolvent debtor's assets are liquidated and the debtor is relieved of further liability. Chapter 7 deals with liquidation, while Chapter 13 deals with reorganization. If you have questions concerning bankruptcy, you should seek the advice of a licensed bankruptcy attorney. Also, see 


Chapter 7 bankruptcy is when the court appoints a Trustee who may liquidate or sell some things that you own to pay your creditors. Most of your debt will be canceled, but you may choose to pay some creditors, usually to keep a car or home in which the creditor has a lien.

Chapter 13 bankruptcy is when your debt is reorganized into a single monthly payment. The payment will continue for 36 to 60 months. In no case may a plan provide for payments over a period longer than five years. You do not have to repay all of your debt. You pay only as much as you can afford, but the minimum payment may be affected by property you want to keep. When you complete the payments, debt not paid is discharged.


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American Consumer Credit Counseling (ACCC) provides nonprofit credit counseling, financial education, debt relief consolidation and debt reduction services for consumers nationwide. We offer free credit counseling to help individuals and families learn how to pay down credit card debt and how to eliminate debt altogether. As an alternative to expensive unsecured debt consolidation programs for settling credit card debt, our debt management programs help consumers pay off debts and manage credit card debt more quickly by consolidating payments. We also offer debt negotiation services to help reduce finance charges and interest rates. And our financial education services show consumer how to manage money more effectively and how to get rid of credit card debt more quickly – usually in five years or less.

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