ANSWERS: 1
  • People or businesses can accumulate so much debt that it becomes impossible to repay. When this happens, you have the legal option of filing a bankruptcy petition. However, consider bankruptcy only as a last resort.

    Identification

    A bankruptcy petition is a motion filed by the debtor with the courts to remove the debtor from the legal requirement to pay back accumulated debt, according to USCourts.gov.

    Types

    While most bankruptcy petitions follow roughly the same process, there are six different chapters of the bankruptcy code that you can file your petition under, and each handles debt differently.

    Effects

    A successful Chapter 7 (common for individuals) petition essentially wipes out debt. However, not all bankruptcy petitions remove legal obligation to debt. Chapter 11, for example, merely changes the structure of debt, such as the repayment schedule.

    Fun Fact

    Chapter 7 bankruptcy petitions are successful 99 percent of the time, according to USCourts.gov.

    Considerations

    Creditors to the debtor may file a "petition of the bankruptcy petition" if they believe that the debtor should not be relieved of debt obligations.

    Source:

    Uscourts.gov: The Bankruptcy Process

    Uscourts.gov: Chapter 7

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