What is bankruptcy protection?
If an individual or company is unable to make payment to creditors when paying off their debts, they may submit protection against bankruptcy under the Bankruptcy Acts of the United States. For individuals, bankruptcy protection may include either the cancellation of most debts, along with the sale of some of its assets, or to repay the debt owed by the structured plan. For the enterprise, bankruptcy protection can provide either complete or partial relief from debts and contracts, provided the company remains in operation or may stop operating and selling its assets to pay debt.
There are two types of bankruptcy protection commonly used by individuals: Chapter Seven and Chapter 13, where the “chapter” refers to the chapter of the Bankruptcy of the Code, which describes each of them. In chapter seven, also called "direct bankruptcy" or "liquidation", he is appointed an administrator who controls the individual's assets. The administrator then liquidates or sells the creditors' money to pay off debts if possible. However, an individual can maintaint Some personal property depending on the laws of the state in which they live.
Chapter 13, also called "Bankruptcy of earnings", allows the individual to propose a plan to repay your debts without interest for three to five years, although the individual's payment plan is subject to. While in Chapter 13 the individual is protected from creditors who collect debt or seizure of assets to pay debts, and creditors are obliged to comply with the conditions of the approved payment plan. Both types of personal bankruptcy make it difficult for individuals to obtain a loan for seven to ten years after looking for bankruptcy protection.
businesses can also look for bankruptcy protection according to chapter seven, but also in Chapter 11, which is more reorganized rather than the liquidation of assets. From this type of bankruptcy it can take anywhere in months or years for the business to appear. As in Chapter 13, the company in Chapter 11 may propose a repayment plan for their debtsIn a certain time frame, after which it is in Rěnice to come up with a plan. If the company has shares that are traded on the public stock exchange then shares can no longer be traded as soon as the protection against bankruptcy is promoted. In some cases, this causes the value of the company's shares to go to zero.
For companies, and especially for individuals who are considering bankruptcy, it is very appropriate to leave the counselor of the legal representative as a result of the complexity of bankruptcy laws, which also differ slightly from state to state.