What Is Bankruptcy?
Bankruptcy is a legal proceeding involving a person or company that is unable to pay off their outstanding debts. The bankruptcy process starts with a petition filed by the debtor, which is most common, or on behalf of lenders, which is less common. All of the debtor's assets are measured and evaluated, and the assets may be used to pay off a portion of the outstanding debt.
Bankruptcy gives an individual or business a chance to start fresh by forgiving debts that simply can not be paid while providing lenders a chance to obtain some measure of repayment based on the individual's or business's assets available for liquidation. Theoretically, the chance to file for bankruptcy benefits the overall economy by allowing individuals and companies a second chance to receive access to credit and by providing lenders with a portion of debt repayment. Upon the successful conclusion of bankruptcy proceedings, the debtor is alleviated of the debt obligations that were incurred before declaring bankruptcy.
All bankruptcy proceedings in the United States are handled via 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 absolved of their debts. Administration over bankruptcy cases is commonly 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 case. There is generally very little direct contact between the debtor and the judge unless there is some opposition made in the case by a lender.
Types of Bankruptcy Filings
Bankruptcy filings in the United States fall under one of several chapters of the Bankruptcy Code, consisting of 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 repayment plans. Bankruptcy filing costs differ, depending on the type of bankruptcy, the complexity of the case, and other aspects.
For more information about Bankruptcy in Westminster, California, contact Thomas K. McKnight LLP at (800) 466-7507 or visit our website at TKMLLP.Com for a free consultation!