Generally, bankruptcy refers to a court procedure that helps consumers and businesses get rid of their debts and repay their creditors. The bankruptcy court will protect you during the bankruptcy proceeding if you can prove you are entitled to it.
Generally, there are two types of bankruptcy:
Chapter 7 and Chapter 13 bankruptcy proceedings are the most common for individuals and businesses. Bankruptcies filed under Chapter 7 usually fall under the liquidation category, which means your property can be sold to repay your debts.
Bankruptcy offers individuals and businesses a chance to start over by forgiving debts that cannot be paid while giving creditors the chance to receive some form of repayment based on the assets the individual or business has available for liquidation.
By providing consumers and businesses with a second chance to gain access to credit and by giving creditors a portion of the repayment of debt, bankruptcy can be beneficial to the overall economy. In the event of bankruptcy, the debtor is relieved of the debt obligations incurred before filing for bankruptcy.