The legal proceedings by which the affairs of a bankrupt person are turned over to a trustee or receiver for administration under the bankruptcy laws. There are two types of bankruptcy: Involuntary bankruptcy-one or more creditors of an insolvent debtor file a petition having the debtor declared bankrupt. The voluntary bankruptcy-the debtor files a petition claiming inability to meet financial obligations and willingness to be declared bankrupt.

Bankruptcy is a legal status of a person or other entity that cannot repay the debts it owes to creditors. In most jurisdictions, bankruptcy is imposed by court order, often initiated by the debtor.

Bankruptcy is a process in which people can eliminate or repay some or all of their debts under the protection of the federal bankruptcy court. In a bankruptcy, a person’s assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay. Bankruptcy is a legal proceeding declaring that an individual is unable to pay debts.For the most part, bankruptcies can be divided into two types — liquidation and reorganization.

Chapter 7 bankruptcy comes under the liquidation category. It’s called liquidation because the bankruptcy trustee may take and sell (“liquidate”) some of your property to pay back some of your debt. However, you may keep property that is protected (also called “exempt”) under state law. There are several types of reorganization bankruptcies, but Chapter 13  is most commonly used by consumers. In Chapter 13 bankruptcy, you keep all of your property but must make monthly payments over three to five years to repay all or some of your debt.

Both Chapter 7 and Chapter 13 bankruptcy have many rules — and exceptions to those rules — regarding which debts are covered, who can file, and what property you can and cannot keep.

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