What is Bankruptcy?

Bankruptcy is a legal process that allows individuals or businesses to reorganize or discharge their debts when they are unable to pay them. There are two main types of bankruptcy: Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy, the court will schedule a meeting with all creditors and allow them to vote on whether they want to accept or reject any of the debtor's assets. If most creditors agree, the debtor can sell these assets to pay off their debts. However, if most creditors reject, the assets may be sold and the money distributed among the creditors according to their proportions.

Chapter 13 Bankruptcy

In a Chapter 13 bankruptcy, the debtor creates a plan that outlines how they will pay off their debts over time. This plan must be approved by the court and can include monthly payments to creditors.