I’ve been watching documentaries on bailiffs recently and a lot of people file for bankruptcy due to having no assets etc. How does it work for those in debt, and what happens to their debts?
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Bankruptcy is a legal process where a person or business declares they are unable to pay their debts and seeks protection from creditors. A court-appointed trustee manages the person’s assets and pays off debts, with the person receiving a discharge of most debts. However, this discharge will have a negative impact on the person’s credit score for up to 10 years and can limit their ability to obtain credit in the future. Assets may be sold to pay off creditors, and certain types of debts, such as student loans or taxes, may not be dischargeable. Bankruptcy should be considered a last resort and other options for managing debt should be considered first.
Bankruptcy is a legal process where a person or business declares they are unable to pay their debts and seeks protection from creditors. A court-appointed trustee manages the person’s assets and pays off debts, with the person receiving a discharge of most debts. However, this discharge will have a negative impact on the person’s credit score for up to 10 years and can limit their ability to obtain credit in the future. Assets may be sold to pay off creditors, and certain types of debts, such as student loans or taxes, may not be dischargeable. Bankruptcy should be considered a last resort and other options for managing debt should be considered first.
Bankruptcy is a legal process where a person or business declares they are unable to pay their debts and seeks protection from creditors. A court-appointed trustee manages the person’s assets and pays off debts, with the person receiving a discharge of most debts. However, this discharge will have a negative impact on the person’s credit score for up to 10 years and can limit their ability to obtain credit in the future. Assets may be sold to pay off creditors, and certain types of debts, such as student loans or taxes, may not be dischargeable. Bankruptcy should be considered a last resort and other options for managing debt should be considered first.
So there are two forms of bankruptcy people typically apply for: Chapter 7 and Chapter 13. Chapter 7 deals with those who have no assets.
Chapter 7:
So there are two cases for Chapter 7: asset and no-asset.
In no-asset cases, the debt can be removed. The creditors will not be able to collect on the debt. Some debts cannot be removed. It is up to the court to decide that.
In asset cases, the court will liquidate your assets to pay the debts.
So there are two forms of bankruptcy people typically apply for: Chapter 7 and Chapter 13. Chapter 7 deals with those who have no assets.
Chapter 7:
So there are two cases for Chapter 7: asset and no-asset.
In no-asset cases, the debt can be removed. The creditors will not be able to collect on the debt. Some debts cannot be removed. It is up to the court to decide that.
In asset cases, the court will liquidate your assets to pay the debts.
So there are two forms of bankruptcy people typically apply for: Chapter 7 and Chapter 13. Chapter 7 deals with those who have no assets.
Chapter 7:
So there are two cases for Chapter 7: asset and no-asset.
In no-asset cases, the debt can be removed. The creditors will not be able to collect on the debt. Some debts cannot be removed. It is up to the court to decide that.
In asset cases, the court will liquidate your assets to pay the debts.
At a very high level, bankruptcy is what happens when a company or individual can no longer pay the money it owes right now, i.e. it has payments due today it can’t make (insolvency). Continuing to operate an insolvent business is illegal and it will fall apart regardless.
Bankruptcy is basically a orderly process that determines what to do with any remaining assets (e.g. land, vehicles, money owed by other companies, etc). The aim is to have a vaguely fair, systematic way of dealing with an insolvent company (i.e. a disaster).
Typically the company is liquidated. A liquidator (a kind of lawyer) arranges for everything to be sold.
Then typically salaries will be paid out first (so people don’t get robbed of income they worked for), then secured creditors (e.g. when you loan a truck, and the creditor has an agreement to take back the truck if you don’t pay) then unsecured creditors. Stakeholders/owners get any leftovers.
In another form of bankruptcy, a company might be reorganised by the owner, creditors and a judge. The idea is that they’ll try and make a profitable company so that the creditors lose less money – particularly when whatever assets the company has aren’t worth much if they’re just liquidated.
Bankruptcy for people is similar. People who go bankrupt often have restrictions placed on them (e.g. being unable to direct companies, take loans, etc) for a period following the bankruptcy.
At a very high level, bankruptcy is what happens when a company or individual can no longer pay the money it owes right now, i.e. it has payments due today it can’t make (insolvency). Continuing to operate an insolvent business is illegal and it will fall apart regardless.
Bankruptcy is basically a orderly process that determines what to do with any remaining assets (e.g. land, vehicles, money owed by other companies, etc). The aim is to have a vaguely fair, systematic way of dealing with an insolvent company (i.e. a disaster).
Typically the company is liquidated. A liquidator (a kind of lawyer) arranges for everything to be sold.
Then typically salaries will be paid out first (so people don’t get robbed of income they worked for), then secured creditors (e.g. when you loan a truck, and the creditor has an agreement to take back the truck if you don’t pay) then unsecured creditors. Stakeholders/owners get any leftovers.
In another form of bankruptcy, a company might be reorganised by the owner, creditors and a judge. The idea is that they’ll try and make a profitable company so that the creditors lose less money – particularly when whatever assets the company has aren’t worth much if they’re just liquidated.
Bankruptcy for people is similar. People who go bankrupt often have restrictions placed on them (e.g. being unable to direct companies, take loans, etc) for a period following the bankruptcy.
At a very high level, bankruptcy is what happens when a company or individual can no longer pay the money it owes right now, i.e. it has payments due today it can’t make (insolvency). Continuing to operate an insolvent business is illegal and it will fall apart regardless.
Bankruptcy is basically a orderly process that determines what to do with any remaining assets (e.g. land, vehicles, money owed by other companies, etc). The aim is to have a vaguely fair, systematic way of dealing with an insolvent company (i.e. a disaster).
Typically the company is liquidated. A liquidator (a kind of lawyer) arranges for everything to be sold.
Then typically salaries will be paid out first (so people don’t get robbed of income they worked for), then secured creditors (e.g. when you loan a truck, and the creditor has an agreement to take back the truck if you don’t pay) then unsecured creditors. Stakeholders/owners get any leftovers.
In another form of bankruptcy, a company might be reorganised by the owner, creditors and a judge. The idea is that they’ll try and make a profitable company so that the creditors lose less money – particularly when whatever assets the company has aren’t worth much if they’re just liquidated.
Bankruptcy for people is similar. People who go bankrupt often have restrictions placed on them (e.g. being unable to direct companies, take loans, etc) for a period following the bankruptcy.
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