Under this type of bankruptcy, all or part of an individual’s lines of credit and debt is granted legal forgiveness.

Question

Under this type of bankruptcy, all or part of an individual’s lines of credit and debt is granted legal forgiveness.

BlackTom AI · Accepted Answer

The question asks about the bankruptcy type in which all or part of an individual's lines of credit and debt receive legal forgiveness.
Option 1: Chapter 6. This is incorrect because Chapter 6 is not a recognized chapter in the U.S. Bankruptcy Code for consumer or corporate bankruptcy.
Option 2: Chapter 14. This is incorrect; Chapter 14 does not exist in the U.S. bankruptcy framework.
Option 3: Chapter 13. This option describes a reorganization plan for individuals with regular income, where debts are repaid over a period (typically 3 to 5 years). While some debts may be discharged at the end, the process centers on a repayment plan rather than universal forgiveness of all eligible debts from the start.
Option 4: Chapter 11. This is a reorganization provision primarily for businesses (and some high-income individuals). It focuses on restructuring debts and assets rather than an immediate broad discharge of most debts, so it does not align with the description of broad legal forgiveness for an individual.
Option 5: Chapter 7. This is the correct choice. Chapter 7 involves liquidation and, for individuals, a discharge that forgives many unsecured debts, effectively eliminating liability for those debts that are dischargeable. Important caveats include that certain debts (such as most student loans, many taxes, alimony/child support, and secured debts if the creditor can reclaim collateral) may not be discharged, and some property may be sold to pay creditors. The emphasis is on a relatively swift discharge of eligible debts, which matches the notion of “legal forgiveness.”

FSOS 1301 (001) Final Exam/Quiz

Under this type of bankruptcy, all or part of an individual’s lines of credit and debt is granted legal forgiveness.

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FSOS 1301 (001) Final Exam/Quiz

Under this type of bankruptcy, all or part of an individual’s lines of credit and debt is granted legal forgiveness.

View Explanation

Log in for full answers

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