How Bankruptcy Works

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How Bankruptcy Works

  1. 1. How Bankruptcy Works Your Guide to Bankruptcy
  2. 2. What is Bankruptcy? A consumer protection law. It is a Federal process, which allows consumers to have debts forgiven or discharged. Prevents creditors from collecting dept outside of the bankruptcy filing.
  3. 3. What is Bankruptcy? The process involves complex areas of the law that encompass elements of:  Contract law  Corporate law  Tax law  Real estate law
  4. 4. Causes of Bankruptcy Scandals Lawsuits Government Fines Creditor Collections Sudden Loss of Revenue
  5. 5. Bankruptcy TermsDebt Adjustment: Settled repayment arrangements that differ from the original arrangements.Dischargeable Debts: Debts resolved during bankruptcy.Nondischargeabe Debts: Debts unresolved when filing for bankruptcy.
  6. 6. Bankruptcy TermsLien: A charge or impediment upon property for the satisfaction of a debt.Secured Debt: A debt on which a creditor has a lien.Unsecured Debt: A debt that is not tied to any item of property.
  7. 7. Types of Bankruptcy Chapter 7 Best known as Liquidation Bankruptcy For individuals and companies Most common type
  8. 8. Types of Bankruptcy Chapter 7 Process involves selling off non-exempt assets from the debtor to pay off debt Income generated afterwards is not apart of bankruptcy allowing the debtor to keep money
  9. 9. Types of Bankruptcy Chapter 11 Most complex amongst businesses & a few individuals The debtor continues to function and maintain ownership of all assets while working out a plan to pay off creditors
  10. 10. Types of Bankruptcy Chapter 11 The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.  A 120-day time span in which the debtor has to come up with a repayment plan  If they fail, the creditor will develop a plan themselves
  11. 11. Types of Bankruptcy Chapter 12 For farm owners Allows farmers to keep their assets while forming a payment plan to pay off their creditors
  12. 12. Types of Bankruptcy Chapter 13 Similar to Chapter 11, only it is for individuals They are given a 3 - 5 year repayment plan while keeping their assets
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