In the U.S., bankruptcy law refers to a series of laws and rules that can help people who owe more debt than they can reasonably pay. Under these regulations, people who are unable to pay off their creditors can solidify a fresh start either by creating a repayment plan or liquidating their assets. The two main purposes of bankruptcy law are as follows:
- Help the debtor achieve a fresh start by relieving most of their debts.
- Pay off creditors in an orderly manner to the extent of the assets the debtor has available for repayment.
Generally speaking, bankruptcy cases start off by the debtor filing a petition with the bankruptcy court. In addition to this petition, the debtor must file statements that list his/her liabilities, income, assets, and the names and addresses of any creditors owed. When a debtor files this petition, it automatically prevents any debt collection actions from moving forward. As long as this action remains in effect, creditors cannot garnish the debtor’s wages, demand repayment, or file lawsuits against the debtor.
The creditors then receive notice that the debtor has filed for bankruptcy. At this point, the debtor will either liquidate his/her property or establish a plan to provide repayment to his/her creditors. Then, the debtor’s remaining debts are discharged, and the debtor can rebuild finances.
If you have any questions about bankruptcy law and how it could affect your individual situation, our firm is ready and waiting to help. Contact us today to set up a consultation!