More than ever the average person is becoming aware that bankruptcy has lost any negative stigma that it once may have had. It’s often used by major businesses to address their financial circumstances and is more and more being used by the ordinary person as a financial tool. Let’s take a little closer look at bankruptcy.
Bankruptcy is a set of laws passed by Congress to help both citizens and businesses work through dealing with too much debt. Since bankruptcy laws are federal laws, they can be used in all 50 states. There some differences from one state to another and it’s important that a local bankruptcy attorney be involved so these differences can be taken into account. There is also a Bankruptcy Court System with its own Bankruptcy Judges that is part of the Judiciary Branch of the US Government. Bankruptcy courts are specialized and work with only bankruptcy issues and all bankruptcy cases are only heard in a bankruptcy court.
The three most common bankruptcy types, which are called Chapters, are Chapter 7 bankruptcy and Chapter 13 bankruptcy which are used primarily by individuals. Then there is Chapter 11 which is primarily used by businesses. However, all 3 chapters are available to both individuals and businesses and it depends on the circumstances, also under the personal and business bankruptcy. A good bankruptcy attorney is important in working through these differences.
Basically Chapter 7 is set up to liquidate debt. Chapter 11 bankruptcy and 13 has the purpose of restructuring and working through debt obligations. If this can’t be done, the case can move to Chapter 7 which is not uncommon. For a person or business to take advantage of the bankruptcy laws, they must “file a petition”. The “petition” determines if the party filing it meets the criteria to seek relief under the bankruptcy laws and in the bankruptcy courts. Not every time someone wants financial relief do they meet the needed criteria and therefore they can’t file bankruptcy. A good bankruptcy attorney can determine if a party qualifies.
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