What is bankrupt

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Chapter 7 Bankruptcy Chapter 7 bankruptcy, also known as "straight bankruptcy," is what most people probably think of when they're considering filing for bankruptcy. Chapter 13 Bankruptcy Chapter 13 bankruptcy works slightly differently, allowing you to keep your property in exchange for partially or completely repaying your debt.

Bankruptcy Terms to Know Throughout bankruptcy proceedings, you'll likely come across some legal terms particular to bankruptcy proceedings that you'll need to know. Here are some of the most common and important ones: Bankruptcy trustee : This is the person or corporation, appointed by the bankruptcy court, to act on behalf of the creditors. He or she reviews the debtor's petition, liquidates property under Chapter 7 filings, and distributes the proceeds to creditors.

In Chapter 13 filings, the trustee also oversees the debtor's repayment plan, receives payments from the debtor and disburses the money to creditors. Credit counseling: Before you'll be allowed to file for bankruptcy, you'll need to meet either individually or in a group with a nonprofit budget and credit counseling agency. Once you've filed, you'll also be required to complete a course in personal financial management before the bankruptcy can be discharged.

Under certain circumstances, both requirements could be waived. Discharged bankruptcy : When bankruptcy proceedings are complete, the bankruptcy is considered "discharged.

Under Chapter 13, it occurs when you've completed your repayment plan. Exempt property: Although both types of bankruptcy may require you to sell assets to help repay creditors, some types of property may be exempt from sale. State law determines what a debtor may be allowed to keep, but generally items like work tools, a personal vehicle or equity in a primary residence may be exempted. Lien: A legal action that allows a creditor to take, hold and sell a debtor's real estate for security or repayment of a debt.

Liquidation: The sale of a debtor's non-exempt property. Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations that were incurred prior to filing for bankruptcy. All bankruptcy cases in the United States are handled through federal courts. Any decisions in federal bankruptcy cases are made by a bankruptcy judge, including whether a debtor is eligible to file and whether they should be discharged of their debts.

Administration over bankruptcy cases is often handled by a trustee , an officer appointed by the United States Trustee Program of the Department of Justice, to represent the debtor's estate in the proceeding. Bankruptcy filings in the United States fall under one of several chapters of the Bankruptcy Code, including Chapter 7 , which involves the liquidation of assets; Chapter 11 , which deals with company or individual reorganizations ; and Chapter 13 , which arranges for debt repayment with lowered debt covenants or specific payment plans.

Bankruptcy filing costs vary, depending on the type of bankruptcy, the complexity of the case, and other factors. Individuals—and in some cases businesses, with few or no assets—typically file Chapter 7 bankruptcy.

It allows them to dispose of their unsecured debts , such as credit card balances and medical bills. Those with nonexempt assets, such as family heirlooms collections with high valuations, such as coin or stamp collections ; second homes; and cash, stocks , or bonds must liquidate the property to repay some or all of their unsecured debts.

A person filing Chapter 7 bankruptcy is basically selling off their assets to clear their debt. People who have no valuable assets and only exempt property—such as household goods, clothing, tools for their trades, and a personal vehicle worth up to a certain value—may end up repaying no part of their unsecured debt. Businesses often file Chapter 11 bankruptcy, the goal of which is to reorganize, remain in business, and once again become profitable.

Filing Chapter 11 bankruptcy allows a company to create plans for profitability, cut costs, and find new ways to increase revenue. Their preferred stockholders , if any, may still receive payments, though common stockholders will not. On Sept. The settlement dissolves Purdue Pharma and creates a new public benefit company charged with funding opioid-addiction treatment and prevention. Purdue also agreed to release 30 million documents related to the case.

For example, a housekeeping business filing Chapter 11 bankruptcy might increase its rates slightly and offer more services to become profitable. Chapter 11 bankruptcy allows the business to continue conducting its business activities without interruption while working on a debt repayment plan under the court's supervision.

In rare cases, individuals can also file Chapter 11 bankruptcy. Individuals who make too much money to qualify for Chapter 7 bankruptcy may file under Chapter 13 , also known as a wage earner's plan.

It allows individuals—as well as businesses, with consistent income—to create workable debt repayment plans. The repayment plans are commonly in installments over the course of a three- to five-year period.

In exchange for repaying their creditors, the courts allow these debtors to keep all of their property, including otherwise nonexempt property. While Chapter 7, Chapter 11, and Chapter 13 are the most common bankruptcy proceedings, especially as far as individuals are concerned, the law also provides for several other types:.

When a debtor receives a discharge order, they are no longer legally required to pay the debts specified in the order. What's more, any creditor listed on the discharge order cannot legally undertake any type of collection activity such as making phone calls or sending letters against the debtor once the discharge order is in force. If you have debt problems, you might think that becoming bankrupt would help.

It's important to understand what bankruptcy is and what alternatives are available. As bankruptcy isn't permanent, it might clear your debts and allow you to start again. Bankruptcy is a legal status that usually lasts for a year and can be a way to clear debts you can't pay.

When you're bankrupt, your non-essential assets property and what you own and excess income are used to pay off your creditors people you owe money to.

At the end of the bankruptcy, most debts are cancelled. The High Court can declare you bankrupt by making a 'bankruptcy order' after it's been presented with a 'bankruptcy petition'. A petition may be presented by:. If you decide bankruptcy is suitable, you need to fill in two forms. You need to fill in this form to ask the court to make you bankrupt and includes the reasons for asking.

This form asks you to list all your assets anything that belongs to you that might be used to pay your debts and all your debts, including the names and addresses of the creditors and the amount you owe each one. When you have filled in this form, you must make a sworn statement as to its accuracy and completeness before an officer of the court or a solicitor.

It is important you declare honestly all your assets and debts. There are three fees you must pay when you take your petition and statement of affairs to the court:. You should take these forms with the receipt of your deposit paid to the Insolvency Service, to the High Court.

There might be different petitioning creditors on the same petition for different debts you owe. Once bankruptcy proceedings have started, you must co-operate fully even if it's a creditor's petition and you dispute their claim.

If possible you should try to reach a settlement before the petition's due to be heard - doing it later can be difficult and expensive. Bankruptcy is serious. You'll need to give up possessions of value and the interest in your home.

But you don't need to become bankrupt because you're in debt. A Debt Relief Order is a formal insolvency process for people who cannot pay their debts and who have no assets, a low income, no other access to debt relief and no prospect of the situation improving.