Eli5 how does filing for bankruptcy work? Do you just stop having debt and get to start over?
In: 8
There are two types of bankruptcy in the USA for the general public.
Reorganization: This is where you present the judge all the information about your income, assets, and debts. Your lawyer and you also drop up a repayment plan for all or some of your debts, and you get to keep the assets if you can make the payments. The judge looks over the repayment plan and then asks any of your creditors if they have any objections. Then the judge decides if the plan is reasonable and if so you go on your merry way. You pay on the plan until the end date and the agreed upon money has been repaid, then you are debt free.
Liquidation: With liquidation bankruptcy essentially what happens is that you present the courts with your assets and debts. They will seize any assets worth a high value, and sell them. They will usually let you keep 1 vehicle and possibly your house depending on how much you have in equity. Then, you are debt free. However, if your income is too high the courts will not let you do this and instead require you to do reorganization and repay your debts.
Latest Answers