Personal bankruptcy law allows, in certain jurisdictions, an individual to declare bankruptcy. Virtually every country with a modern legal system features some form of debt relief for individuals. Personal bankruptcy is distinguished from corporate bankruptcy.
Contents
By country
The DICE report 2006 of Munich's ifo Economic Research compared international personal bankruptcy in selected OECD-countries.
United States
In the United States, the same chapters of the Bankruptcy Code are applied in both personal and corporate bankruptcies. Most individuals who enter bankruptcy do so under Chapter 13 (a "reorganization" plan) or Chapter 7 (a "liquidation" of debtor's assets). More rarely, personal bankruptcy proceedings are carried out under Chapter 11. The ultimate goal of personal bankruptcy, from the viewpoint of the debtor, is receiving a discharge.
Canada
The concept behind bankruptcy in Canada is that an individual assigns (surrender) everything they own to a trustee in bankruptcy in exchange for the elimination of their unsecured debts.
The rules for filing personal bankruptcy in each province and territory differ slightly. In some areas of Canada individuals may be permitted to keep (exempt) certain property. Common items for exemption include clothing, furniture, appliances, motor vehicles, medical and dental aids, a home, family heirlooms, and some insurance. In basic terms, any property the debtor might require to survive can be exempt. Personal Bankruptcy will eliminate most, if not all, of an individual’s debt, but it also impacts their future ability to obtain credit.
The cost of personal bankruptcy in Canada depends on the individual’s monthly family income, the size of the family, and their assets (such as RRSPs). An alternative to personal bankruptcy (in Canada) is a Consumer Proposal. Another option in Canada is a debt consolidation. No matter what option they choose, they can often turn to a trustee in bankruptcy for a free consultation.
Israel
Personal bankruptcy in Israel is governed by the Bankruptcy Ordinance, 1980. Debtors and their creditors may apply to the court for bankruptcy. If it is granted, an automatic stay enters into force and a trustee (frequently the Official Receiver) is appointed for the debtor's assets. The automatic stay does not bar secured creditors' lien enforcement. Bona fide debtors usually receive a discharge either immediately (if they have practically no assets) or within several months to several years from the onset of proceedings (during which time the debtor is mostly required to pay a periodic sum, set by the court, that goes towards paying the creditors). Since 1996, Israeli personal bankruptcy law has shifted to a relatively debtor-friendly regime, not unlike the American model.