Bankruptcy

Bankruptcy secures the debtor from debt collection by creditors. A debtor might apply for bankruptcy, which is called “voluntary bankruptcy,” or a creditor may petition the court to state the debtor bankrupt, which is called “involuntary bankruptcy.” Involuntary bankruptcy is allowed just under chapter 7 or chapter 11 of the U.S. Bankruptcy Code.

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There are four types of relief available to individuals or corporations under the Bankruptcy Code: liquidation (chapter 7), reorganization (chapter 11), debt modification for a family farmer or fisherman (chapter 12), and debt change for an individual with a regular income (chapter 13). Municipalities might apply for bankruptcy under chapter 9.

The bankruptcy court figures out which debts are to be repaid according to their concern, and the debtor is usually granted a discharge from debts that are dischargeable under the Bankruptcy Code.

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