Bankruptcy

Bankruptcy is a legally declared inability or impairment of ability of an individual or organizations to pay their creditors. Bankruptcy allows debtors to be discharged from the legal obligation to pay most debts by submitting their non-exempt assets, if any, to the jurisdiction of the bankruptcy court for eventual distribution among their creditors.
Bankruptcy laws help people who can no longer pay their creditors get a fresh start by liquidating their assets to pay their debts, or by creating a repayment plan. Bankruptcy laws also protect troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation.
In a liquidation bankruptcy, the Debtor's nonexempt (IE, legally unprotected) assets are sold off to satisfy creditor claims. A reorganization bankruptcy is a bankruptcy in which a debtor reorganizes/restructures assets and debts. Individuals may initiate a reorganization bankruptcy in order to retain assets and pay creditor claims out of the individual's income.
What is the difference between Chapter 7 and Chapter 13 bankruptcy. " Under a liquidation bankruptcy (Chapter 7), you ask the bankruptcy court to wipe out (discharge) the debts you owe. Under a reorganization bankruptcy (typically Chapter 13, for consumers), you file a plan with the bankruptcy court proposing how you will repay your creditors. When you file either kind of bankruptcy, a court order called an "automatic stay" goes into effect. The automatic stay prohibits most creditors from taking any action to collect the debts you owe them unless the bankruptcy court lifts the stay and lets the creditor proceed with collections. And other types of debts might not be discharged if a creditor convinces the court that the debt should survive your bankruptcy.