There is a saying that bankruptcy is a financial death followed by financial rebirth. Finding yourself irreversibly stuck in huge debts with no legal way out is well – known situation throughout the history. Nowadays, it is not such a stigma or a tragedy as it was before. Nowadays, we have bankruptcy laws helping people (for example ) who can no longer afford to pay their debts to get a fresh start. It is usually done in one of two ways: either by liquidating debtor’s assets or by making and realizing a repayment plan. Nowadays, some people even see bankruptcy as a remedy, a smart thing to do in order to reset, regroup and give a brand new shot. Guiding idea says it is better to have no money than to owe money.
The procedure begins by filing papers, appearing before a judge and proving bankruptcy. Bankruptcy can be filed by an individual or by a corporation. A married person may file alone or together with spouse. All bankruptcy cases are handled by federal bankruptcy courts according to federal (not state) bankruptcy laws. Depending on a situation and a type of debtor, there are different laws for individuals, families, public entities, companies and some privileged businesses. All debtors may file “pro se”, meaning without being represented by a qualified lawyer, but getting professional legal assistance is highly recommended, because process of bankruptcy comes with serious future legal and financial consequences and limits.
Once the debtor declares bankruptcy according to one of several bankruptcy laws, the court will order debtor to sell all its property that can be used to pay back his debts, though allowing debtor to keep some of his assets, as a solid ground for a new beginning. Other possibilities include out of court settlement with creditors, which demand creditors’ cooperation. There is also a possibility of making plan for reorganization. The debtor gets some extra period of time and permission from the court to reorganize the business, so the future income pays back the debts. Legal reduction of total amount of debts is also an option.