SRS - Bankruptcy Law (Lesson)

Introduction

Have you ever had something that you had worked really hard for that didn’t really go as planned? Most likely you had to regroup and start over. This scenario plays out over and over again in many lives as well as in the business world. Often, individuals and businesses alike find themselves in tight financial situations, due to some sort of illness, bad money management, and other life circumstance or economic crisis.

Let's look at two different scenarios. Click on each the checkmark buttons below to read about each scenario.

In these scenarios, no one planned to find themselves in such a situation; however, both needed a way out and a way for a fresh start. Filing bankruptcy can help an individual or a business by discarding debt or making a plan to repay debts, depending on the situation. Even though bankruptcy rules apply differently to individuals and businesses, the process could be the answer to a trying situation. In this microlesson, we will look at the basics of bankruptcy and review the different types of bankruptcy.

Bankrupcy

Bankruptcy is a governed process which helps individuals or businesses who can no longer pay their debts get a fresh start. This process involves liquidating assets to pay the debts or by creating a repayment plan for payment of the debts. Bankruptcy is a court proceeding in which a judge and court trustee examine the assets and liabilities of individuals and businesses who can’t pay their bills. In this proceeding the judge and court trustee decide whether to discharge the debts so the individual or entity is no longer legally required to pay them. All bankruptcy cases are handled in federal courts under rules outline by the United States Bankruptcy Code. Bankruptcy laws were written to give people and businesses whose finances collapse a chance to start over.

Review the presentation below for more basic facts about bankruptcy and the different types of bankruptcy.

Let's Review!

Take a moment to participate in the following activity to practice your understanding of the topics in this module.  Reach out to your instructor if you have any questions.

Final Thoughts

The individuals and businesses who file for bankruptcy have far more debts than they have money to cover the debts. They have reached a point to where they see no way out. Bankruptcy law was written to help individuals and businesses in this situation. Filing bankruptcy is a legal process that either reduces, restructures, or eliminates debt. There are several types of bankruptcy and your situation dictates which process you follow.

It is important to understand, however, that even though bankruptcy does give those who have reached a financial crisis a way out, it definitely affects their credit and future ability to use money. The process may help to save a family their home or help a business to keep it operating, but in the end, there still may be a price to pay. Bankruptcy remains on your credit for 7-10 years, depending on which chapter of bankruptcy you file under.

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