Bankruptcy is a legally declared inability of individuals or businesses to discharge their debts. A declared state of bankruptcy can be requested not only by creditors in an effort to get what they are owed but also by the insolvent individual or organization. If it is difficult to repay debts, declaring the bankruptcy may be the right solution to debt problems.
Out of six basic types of under the Bankruptcy Code, Chapter 7 is a liquidation of nonexempt assets to pay debts. In a court-supervised procedure, a court appoints a trustee who liquidates the non-exempt assets of the debtors estate and makes distributions to creditors. The Bankruptcy Code allows the debtor to keep certain exempt property; but a trustee will liquidate the debtor’s remaining assets.
According to the amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, if a debtors income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief. Filing a petition under chapter 7, automatically stays most collection actions against the debtor or the debtor’s property, but potential debtors should...
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