What Is Bankruptcy? | Tucson, AZ Bankruptcy Attorney | Mesa, AZ Bankruptcy Lawyer
What is bankruptcy? It is the legal procedure that allows individuals, businesses, and other organizations to get relief from burdensome debts, either by modifying the repayment schedule, reducing the debt, or eliminating it altogether. Precisely what kind of relief is available with respect to a particular debt depends on the nature of the debt (e.g. is it a secured debt like a mortgage, or unsecured debt like a credit card balance), the type of bankruptcy, and several other factors that vary based on individual circumstances.
Bankruptcy law is federal law, and is provided for in the United States Constitution, Article 1, Section 8. A bankruptcy case is filed in a United States Bankruptcy court.
The Objectives of Bankruptcy
The first of these objectives is accomplished through the bankruptcy discharge, which releases the debtor from personal liability for specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts.
The second objective is accomplished by the automatic stay, which prevents most creditors from taking any action to collect a debt once a bankruptcy is filed, and by the bankruptcy laws and rules that lay out how much of a debtor’s property may be taken by creditors, and in what order the creditors get paid.
Types of Consumer Bankruptcy
There are two main types of consumer bankruptcy:
Business bankruptcy serves one of two purposes. It allows businesses undergoing temporary financial struggles, but wishing to continue operating, to effectively reorganize by restructuring and modifying their debts, thus preserving the business’s going concern value.
For businesses wishing to wind up their operations, business bankruptcy allows for an orderly liquidation, with the business owners retaining primary control over the timing and disposition of the business’s assets. Business bankruptcy cases are primarily filed under Chapter 11 – Business Reorganization.
- What debts can be discharged?
- Can I keep my house?
- Will bankruptcy stop wage garnishments?
- Do I have to give up all my assets?
- Do I have to list all my debts and assets?
- How will bankruptcy affect my credit?
- Can I discharge a payday loan?
- Can I eliminate my mortgage?
- What is a meeting of creditors?
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