Bankruptcy is a legal process that allows individuals or businesses to eliminate or restructure their debts when they can no longer pay them. Bankruptcy laws are designed to provide relief to people and businesses in financial distress and to protect creditors’ rights to receive payment.
There are different types of bankruptcy, including Chapter 7, Chapter 11, and Chapter 13 bankruptcy. In Chapter 7 bankruptcy, most of the debtor’s assets are sold to pay off debts, while in Chapter 11 bankruptcy, the debtor restructures their debts to continue operating their business. In Chapter 13 bankruptcy, the debtor proposes a repayment plan to pay off their debts over a period of three to five years.
Filing for bankruptcy can have long-term consequences on a person’s credit score and financial future. It’s important to seek the advice of a qualified bankruptcy attorney before deciding to file for bankruptcy.