Bankruptcy

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What is 'Bankruptcy'

A legal proceeding involving a person or business that is unable to repay outstanding debts. The bankruptcy process begins with a petition filed by the debtor (most common) or on behalf of creditors (less common). All of the debtor's assets are measured and evaluated, whereupon the assets are used to repay a portion of outstanding debt. Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred prior to filing for bankruptcy.

BREAKING DOWN 'Bankruptcy'

Bankruptcy offers an individual or business a chance to start fresh by forgiving debts that simply can't be paid while offering creditors a chance to obtain some measure of repayment based on what assets are available. In theory, the ability to file for bankruptcy can benefit an overall economy by giving persons and businesses another chance and providing creditors with a measure of debt repayment.

Bankruptcy filings in the United States can fall under one of several chapters of the Bankruptcy Code, such as Chapter 7 (which involves liquidation of assets), Chapter 11 (company or individual "reorganizations") and Chapter 13 (debt repayment with lowered debt covenants or payment plans). Bankruptcy filing specifications vary widely among different countries, leading to higher and lower filing rates depending on how easily a person or company can complete the process.

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RELATED FAQS
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    Learn about the various consequences, both positive and negative, that you can expect to result from your filing for bankruptcy. Read Answer >>
  3. How do I find a good personal bankruptcy lawyer?

    Read how to find a good personal bankruptcy lawyer, and learn how much you can expect to pay for services if you are considering ... Read Answer >>
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    Learn how filing bankruptcy affects your ability to obtain credit in the future, and find out how long a bankruptcy stays ... Read Answer >>
  5. How do I get information about my bankruptcy case?

    Learn about different places to search when seeking information about an individual's bankruptcy. Learn about Public Access ... Read Answer >>
  6. Under what circumstances might a company decide to liquidate?

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