What is Bankruptcy and How Does It Work
Bankruptcy is a method devised to lift the burden of those individuals, firms or organizations that are unable to meet the amount of overwhelming debt due to the lack of income. It helps the consumer to relax a little and released from the burden of debt either partially or completely based on the circumstances and condition of the firm. However, filing for bankruptcy keeps the consumer in defaulters name for the following ten years. Therefore, he is not given any sort of debt by any credible source. Bankruptcy is an issue that is dealt by federal law. However, in a scenario where the state law has some disagreement with the federal law than the state law prevails.
Instructions
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There are four types of bankruptcy laws that are a part of the constitution. They are named as chapter 7, chapter 11, chapter 12 and chapter 13.
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Chapter 7
It is a type of law that happens with the highest frequency. The scenario for this law to be imposed is when the firm applies for the liquidation of assets to meet the overwhelming debts and the debts are wiped out completely. Nothing is left in the account but the firm itself cease to exist as well. Those entities who can file for chapter 7 bankruptcies include individuals, married couples, partnerships as well as corporations. -
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Chapter 11
It is a type of bankruptcy where the owner or the one who files for bankruptcy is allowed to organize the amount of debts in a particular time span. All the claims of the creditors are paid in full by the debtor. The sole purpose of this type of bankruptcy is to allow the entity to generate funds and reorganize the debts so that it can pay them in the prolonged maturity date. -
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Chapter 12
It’s a debt solution for family farmers. -
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Chapter 13
It is a predefined plan that is available for individuals as well as married couples who have taken debts and are unable to analyse the scenario through which they can repay the creditors on time. The plan is devised in a way that it helps the individuals as well as married couples to organize funds for repayment of the debt within a specific statutory amount. This chapter helps the individuals and married couples to find an optimum solution to pay either the portion or the complete debt within the span of next 3-5 years depending on their overall income per annum.
