Bankruptcy is that legal status of the person in which individual, firm unable to pay debt it owes from creditors. Bankruptcy is filed under the protection of Federal bankruptcy Court by individuals, Companies to pay off their creditors.
Property liquidation: In this liquidation some of your assets are sold to pay down your debt and in this return your all debt for which you have not pledged any security abolished like credit card debt, medical debt.
Secured debt: If you owe money by giving security like you buy house by pledging your house then you have choice for allowing your creditor to repossess the property or you may pay lump sump amount equals to replacement value of your property.
Impacts of filing bankruptcy: 1) Negative impact: If you file bankruptcy it remains on your credit report for period of minimum 7 years and maximum 10 years or more as the case may be. These may create problems for taking additional credits and even in applying for new jobs.
Bankruptcy affects your business: If you earn more than a minimum limit then you mast have to pay your debt from extra income you earned and there are also some limitations on your business and employment after you file bankruptcy.
Bankruptcy also effect if you want to go outside from your country: people who file Bankruptcy must have to take permission from trustee in written to go outside country. For learning more about the process of bankruptcy, the applicant can go for the bankruptcy course prior to the commencement of bankruptcy process. After this for getting more detailed knowledge about the bankruptcy, the applicant of bankruptcy can do the second bankruptcy course. Bankruptcy pre discharge course will also helps a lot in managing the process of bankruptcy.
Person filing bankruptcy name get listed on the National Personal Insolvency Index (NPII)
2) Positive impacts: If you file bankruptcy then it prevent creditors to force you to pay debt and utility company is also unable to cut your electricity or gas connection for not paying bills.
Bankruptcy filing is not allowed to all individual or companies if they have sufficient money after deducting expenses from their income to pay off their debts.
Bankruptcy filing cannot works in all kind of debt like tax liability, spousal support obligation, child support, Students loans, and criminal fines
Bankruptcy is also known for liquidation bankruptcy because trustee may acquire some of your asset to pay back your debtor. However you are allowed to retain some assets which are not sold by trustees. Trustee is that person who manages your bankruptcy and helps you in discharging your creditors. If you file bankruptcy you must have to disclose all information to your trustee .This include bank statements, financial statements of your co. and other documents which trustee asks.
Trustee sells your assets
Trustee may sell your assets for paying off creditors but you are able to retain household products, tools which are used for earning income in future, vehicle up to some limit.