Bankruptcy – it is considered to be one of the greatest debt solutions. Bankruptcy is that option through which you as a debtor may be able to discharge almost all of your debts. So, majority consider this option when in serious and complex debt problem. However, it is extremely important for all of the debtors [...]
The following guide focuses on understanding bankruptcy according to the US legal system. In short, bankruptcy is a legal status that has the purpose of providing a “fresh start” for companies and individuals that are unable to pay their debts to the creditors. In addition to eliminating the burden of excessive debt, bankruptcy is a key factor that maintains the normal functioning of the economy, meaning that it aids in keeping the credit flowing.
It is important to note that while in other countries, bankruptcy and insolvency are distinct legal statuses; in the United States the terms are almost synonyms, as bankruptcy refers to the formal insolvency proceedings.
Understanding bankruptcy and what it stands for in the US legal system requires more clarification regarding its goal. Therefore, even though it erases debts and stops creditors from pursuing the insolvent, it is considered a non-inclusive discharge. The reason for this is that certain taxes, student loans, portions of medical debts, or spousal support awards are typically not excused.
Depending on the type of impoverishment the insolvent applies for, bankruptcy can also mean an established reimbursement plan with or without reaffirming of the assets. Consequentially, most financial experts advise against this drastic measure and see it as the last resort for those that are simply unable to manage their debts.