202503211603 - Bankruptcy

Bankruptcy is a legal process that provides individuals or businesses unable to repay their debts with a structured way to either eliminate or reorganize those obligations. It is governed by federal laws under the U.S. Bankruptcy Code and handled in specialized federal bankruptcy courts. Bankruptcy typically begins when the debtor files a petition, although creditors can also initiate the process in some cases. The primary goal of bankruptcy is twofold: to offer debtors a fresh financial start and to ensure creditors receive repayment, either through liquidation of assets or structured repayment plans.

There are several types of bankruptcy, commonly referred to by their chapters in the U.S. Bankruptcy Code:

  • Chapter 7: Known as liquidation bankruptcy, it involves selling non-exempt assets to pay off unsecured debts like credit cards and medical bills.
  • Chapter 11: Typically used by businesses, it allows for debt reorganization while continuing operations.
    • Chapter 13**: Designed for individuals with regular income, it enables them to create a repayment plan over three to five years while keeping their assets.
    Other chapters include Chapter 9 (for municipalities), Chapter 12 (for family farmers and fishermen), and Chapter 15 (for international cases). While bankruptcy can provide relief from unmanageable debt, it carries significant consequences, such as long-term damage to credit scores and potential loss of assets. Seeking legal advice is strongly recommended due to the complexity and lasting impact of the process.

    Citations:
    [1] https://www.investopedia.com/terms/b/bankruptcy.asp
    [2] https://www.experian.com/blogs/ask-experian/credit-education/bankruptcy-how-it-works-types-and-consequences/
    [3] https://www.britannica.com/money/bankruptcy
    [4] https://www.investopedia.com/articles/pf/07/bankruptcy.asp
    [5] https://www.businessinsider.com/personal-finance/credit-score/what-does-bankruptcy-mean-definition
    [6] https://www.uscourts.gov/court-programs/bankruptcy
    [7] https://www.law.cornell.edu/wex/bankruptcy
    [8] https://www.uscourts.gov/court-programs/bankruptcy/bankruptcy-basics
    [9] https://www.nerdwallet.com/article/finance/bankruptcy
    [10] https://vsb.org/GV/Site/news/pubs/bankruptcy-process.aspx
    [11] https://en.wikipedia.org/wiki/Bankruptcy
    [12] https://www.deb.uscourts.gov/understanding-bankruptcy
    [13] https://dictionary.cambridge.org/dictionary/english/bankruptcy
    [14] https://www.youtube.com/watch?v=bM5GoLdyU4g
    [15] https://upsolve.org/learn/every-type-of-bankruptcy-explained/

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