Bankruptcy: The Learning Center
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Bankruptcy - Helpful Information
What is Bankruptcy?
Bankruptcy is a system of laws and courts which govern the rights of debtors (borrowers) and creditors (lenders) when a person or company can no longer meet their financial obligations. The framers of the constitution knew the importance of a clean start for our society. Article 1, section 8 of the US constitution grants Congress the power to establish uniform bankruptcy laws throughout the United States.
Bankruptcy is meant to pay out creditors in a fair and uniform way from the remaining assets of the person or company. Once the process is completed the person or company involved is freed of previous financial obligations, even if their prior debts were not paid in full.
Who is affected by Bankruptcy?
Basically anyone can find themselves faced with navigating the bankruptcy system, especially these days. From Donald Trump, to former professional athletes to your next door neighbor, bankruptcy is a common avenue for getting back on track.
In 2008 there were 1,117,771 bankruptcy filings in the United States, with 126,819 coming from California alone. The total numbers for 2009 are expected to be even higher.
How does the Bankruptcy process work?
Like any legal process, the bankruptcy process can become quite complicated. The process for each individual bankruptcy is first determined by which chapter of bankruptcy code (law) the financial situation fits into. Here is a quick summary of the common ones:
Chapter 7:
The most common type of bankruptcy, it's known as liquidation. A trustee is appointed who collects the non-exempt assets of the debtor, sells it and distributes the proceeds to the creditors. The law outlines what is protected from liquidation so it is important to contact an attorney early before you spend money that may be not included in the liquidation process.
Chapter 11 & 13:
In these types of bankruptcies a plan is established where future earnings are used to pay off creditors. There may or may not be a trustee involved in these cases.
For more information on the process and how your situation may be resolved, please contact us today for your clean start.
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