Bankruptcy is the process to legally declare the inability to pay back their creditors. In other words it can be said that when an individual or organization is not in the state to repay their creditor or repay the debts, they are considered to be bankrupt.
Bankruptcy a process in which a person or a firm declares his inability to repay the debts, in this situation all the available assets are liquidated and then further distributed to the creditors for the settlement of debts. According to the federal code a person or the firm can declare bankruptcy under several chapters that are present in the bankruptcy code.
The most common bankruptcy chapters that are used for settlement are Chapter 7, Chapter 11, and Chapter 13. Upon the discussions and the sessions held by the court and the claims that are filed by the creditors, this will decide which chapter is suitable for the particular situation. And if the court declares so, than the person or the firm has to surrender their assets to the court appointed trustee for which he will be responsible to settle the debts. The debtor has nothing to do with the previous debts now. Read more…