Bankruptcy in the United States allows couples and individuals as well as businesses that are unable to meet their financial obligations to be excused from paying back part of or all of their debt.
Bankruptcy is a process that has been existence since the ancient times.
In the USA however, the procedures and rules revolving filing bankruptcy are governed by Federal law.
State law is prohibited from exercising/legislating in this area of the law.
There are two kinds of bankruptcy.
Liquidation: Under this type of liquidation, debtors are asked to surrender all their property that gets sold and the proceedings from the debts are then distributed amongst the creditors. Then all debts get discharged permanently.
Re-organization Bankruptcy: Debtors are permitted to keep their property, however, the debtor will have to agree to a payment in instalment plan and repay creditors a sum of the amount owed to them.
Filing for bankruptcy in the United States involves the submission of a petition as well as a fee to the bankruptcy court.
For a majority of personal bankruptcies, the fee is close to $300.
The petition will contain statements sworn the debtors in regard to the following;
After filing for bankruptcy, a court hearing date is set.
The purpose of the court date is for reviewing the information that is in the petition.
Chapter 7 bankruptcies are the most common type of bankruptcies filed in the United States.
Under Chapter 7 bankruptcy, the debtor is required to turn over all "Non-exempt" property to the supervising officer referred to as "bankruptcy trustee".
When property falls within a specified category of assets that the debtor is given permission to retain, then the property gets exempted.