What is Bankruptcy?
A legal proceeding that provides relief for individuals or businesses unable to pay their debts, allowing them to eliminate or restructure debt under court protection.
Understanding Bankruptcy
The main consumer bankruptcy chapters are Chapter 7 (liquidation) and Chapter 13 (repayment plan). Bankruptcy provides an automatic stay stopping collection actions and can discharge most unsecured debts. It affects credit scores but offers a fresh financial start.
Examples
- 1Chapter 7 discharge eliminating credit card debt
- 2Chapter 13 plan restructuring mortgage arrears
- 3Business filing Chapter 11 to reorganize
Related Terms
Discharge (Bankruptcy)
The court order that eliminates a debtor's personal liability for certain debts, meaning the debtor is no longer legally required to pay them.
Chapter 7 Bankruptcy
A liquidation bankruptcy where non-exempt assets are sold to pay creditors, and remaining eligible debts are discharged, giving the debtor a fresh start.
Chapter 13 Bankruptcy
A reorganization bankruptcy where debtors propose a 3-5 year repayment plan to pay off all or part of their debts while keeping their property.
Automatic Stay
An injunction that takes effect immediately upon filing bankruptcy, stopping most creditor collection actions including lawsuits, wage garnishment, and foreclosure.
Help Your Clients Understand Their Case
Quilia makes it easy to communicate complex legal concepts to your clients.