What is Bankruptcy?

Bankruptcy, (also known as insolvency) is a legal declaration by an organization or an individual of the inability to pay creditors what they are owed. The declaration can come from either creditors to the individual/organization, in which they try to recoup some of their money or initiate a restructuring of the organization (called involuntary bankruptcy), or from the debtors of an organization (which is a voluntary bankruptcy). Most often, it is initiated by the debtors, and it is a voluntary act.



In the United States, bankruptcy is an act which is placed under Federal jurisdiction by the Constitution of the United States. U.S. Congress has enacted statute laws which govern bankruptcy cases, and is found primarily in the Bankruptcy Code, Title 11 of the United States Code. State laws play a majority role in many cases, and laws are not generalized across the various states.

There are 6 types of bankruptcy one may file for:

1. Chapter 7 – Liquidation for Businesses and Individuals
2. Chapter 9 – A Municipal bankruptcy
3. Chapter 11 – Reorganization – used primarily by debtors in an organization, but sometimes by high net worth individuals
4. Chapter 12 – Rehabilitation for farmers and Fishermen
5. Chapter 13 – Rehabilitation with a plan for payments for individuals with a regular income source
6. Chapter 15 – Other International cases

The most common types of individual bankruptcy are Chapter 7 and Chapter 13. Corporations and Businesses file forms under Chapters 7 and Chapter 11.

Average:

5

Average: 5 (3 votes)

Your rating: Select ratingPoorOkayGoodGreatAwesome

Your rating: None

« PREVIOUSNEXT »