Podcast
Questions and Answers
What is bankruptcy?
What is bankruptcy?
A legal process that relieves debtors of the responsibility of paying their debts or protects them while they try to repay.
When you declare bankruptcy, you are said to be what?
When you declare bankruptcy, you are said to be what?
insolvent
What does it mean to be insolvent?
What does it mean to be insolvent?
You have insufficient income and assets to pay your debts.
What does bankruptcy carry?
What does bankruptcy carry?
What are the two goals of bankruptcy law in the United States?
What are the two goals of bankruptcy law in the United States?
Which of the following are types of bankruptcy? (Select all that apply)
Which of the following are types of bankruptcy? (Select all that apply)
What occurs during involuntary bankruptcy?
What occurs during involuntary bankruptcy?
What does the court do if it agrees to an involuntary bankruptcy petition?
What does the court do if it agrees to an involuntary bankruptcy petition?
How often does involuntary bankruptcy occur and why?
How often does involuntary bankruptcy occur and why?
What is voluntary bankruptcy?
What is voluntary bankruptcy?
What does the court decide when you claim voluntary bankruptcy?
What does the court decide when you claim voluntary bankruptcy?
What is usually true about the value of a bankrupt debtor's assets?
What is usually true about the value of a bankrupt debtor's assets?
What does the court do with the debtor's assets?
What does the court do with the debtor's assets?
What are discharged debts?
What are discharged debts?
What can creditors no longer do for discharged debts?
What can creditors no longer do for discharged debts?
Which of the following debts are not discharged? (Select all that apply)
Which of the following debts are not discharged? (Select all that apply)
After being declared bankrupt, how long before an individual can file for bankruptcy again?
After being declared bankrupt, how long before an individual can file for bankruptcy again?
In the state of Massachusetts, you can claim bankruptcy _____ in a lifetime and it must be at least _____ years apart.
In the state of Massachusetts, you can claim bankruptcy _____ in a lifetime and it must be at least _____ years apart.
Bankruptcy will stay on your credit history for _____ years.
Bankruptcy will stay on your credit history for _____ years.
What is liquidation in the context of bankruptcy?
What is liquidation in the context of bankruptcy?
What is reorganization in bankruptcy?
What is reorganization in bankruptcy?
What is Chapter 11 bankruptcy?
What is Chapter 11 bankruptcy?
What is Chapter 7 bankruptcy?
What is Chapter 7 bankruptcy?
What does Chapter 7 bankruptcy wipe out?
What does Chapter 7 bankruptcy wipe out?
What is the advantage of Chapter 7 bankruptcy?
What is the advantage of Chapter 7 bankruptcy?
It is easy to qualify for Chapter 7 bankruptcy.
It is easy to qualify for Chapter 7 bankruptcy.
What is Chapter 13 bankruptcy?
What is Chapter 13 bankruptcy?
Study Notes
Bankruptcy Overview
- Legal process relieving debtors from debt payment responsibilities or offering protection during repayment.
- Declaring bankruptcy indicates a state of insolvency—insufficient income and assets to pay debts.
Consequences and Goals
- Bankruptcy serves as a second chance but carries serious ramifications.
- U.S. bankruptcy law aims to protect debtors while ensuring fair treatment for creditors handling competing claims.
Types of Bankruptcy
- Involuntary bankruptcy: Creditors petition for bankruptcy declaration against the debtor.
- Voluntary bankruptcy: Most common; debtors file a petition with federal court.
- Chapter 7 bankruptcy: Liquidation form for individuals, erasing most debts in exchange for asset surrender.
- Chapter 11 bankruptcy: Reorganization for businesses, allowing operations under court supervision while repaying debts.
- Chapter 13 bankruptcy: Individual repayment plan, allowing debtors to retain most assets.
Involuntary Bankruptcy
- Rare occurrence since creditors usually prefer complete repayment over asset liquidation.
- Court assumes control over the debtor's assets to pay as much debt as possible if petition is granted.
Voluntary Bankruptcy Proceedings
- Court determines debt repayment amounts, asset retention, and which debts are canceled.
- Typically, debtor's asset value fails to cover total debt.
Debt Discharge and Creditor Rights
- Discharged debts are erased by the court, preventing creditors from further collection efforts.
- Certain debts remain non-dischargeable, including child support, alimony, income tax penalties, student loans, and court-ordered damages.
Filing Restrictions
- Once bankrupt, individuals cannot file again for several years.
- In Massachusetts, individuals may file for bankruptcy twice in their lifetime, with a minimum gap of ten years between filings.
Bankruptcy and Credit Impact
- Bankruptcy remains on credit history for ten years, affecting the debtor’s creditworthiness.
Liquidation vs. Reorganization
- Liquidation involves selling assets to pay debts, resulting in remaining debt discharge.
- Reorganization enables debtors to retain property while submitting a payment plan for a significant debt portion.
Chapter 7 Bankruptcy Details
- Immediate debt relief with most debts wiped out; however, this requires relinquishing most assets.
- Recent laws have increased difficulty in qualifying for this form of bankruptcy.
Chapter 13 Bankruptcy Details
- Allows individuals to keep most property while establishing a structured repayment plan to manage debts.
Studying That Suits You
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Description
Test your knowledge on key bankruptcy terms and concepts with these flashcards. Learn about the legal process of bankruptcy, what it means to be insolvent, and the implications of declaring bankruptcy. This quiz will help you grasp important definitions and their relevance in financial contexts.
