The Basics of Bankruptcy

[Bankruptcy]

The method in which consumers and businesses can terminate or repay a
certain portion or all of their debts is known as bankruptcy. This can
be done under the shelter of the federal bankruptcy court. Bankruptcy
is categorized into two types - liquidation and reorganization.

Chapter 7 bankruptcy stands for liquidation. It is so called because
here, the bankruptcy trustee takes possession and sells off some of
the debtor's holding in order to pay back some of the debt. However,
the debtor has the complete right to keep the property protected as
per state law.

Chapter 13 bankruptcy deals with reorganization. It is more common
than Chapter 7 proceedings. In this bankruptcy code, the debtor is
allowed to keep all of his or her property. Although, here the debtor
has to create monthly payments over a tenure of 3-5 years. Until a
several part of the entire amount of debt is repaid, the process
continues.

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[Bankruptcy]