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What is Bankruptcy?
Bankruptcy is an institution that allows a debtor to restart their life with an essentially clean slate.This comment was made by the Supreme Court on the purpose of bankruptcy during a court decision on the matter in 1934: "It gives to the honest but unfortunate debtor. a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt." When an individual or business declares bankruptcy, they go before a bankruptcy court.The court and bankruptcy judge will study the evidence to determine if the person or business has or will have the ability to pay their creditors in full.Bankruptcy may be denied if this is the case. If this is not the case, however, and bankruptcy becomes official for the person or company, then the bankruptcy court will go about selling and allotting the debtor's property, assets and liquid funds for the purpose of paying as much as possible to the creditors.This is done through a trustee. An individual may apply for a chapter thirteen bankruptcy.In the case of a chapter thirteen, only what is more than necessary for them will be sold.For example, a second or expensive car, a vacation home or a mansion might be sold.A speedboat or four-wheeler might be auctioned off.An individual may be allowed to keep their property and even continue to run their business. In the case of bankruptcy, a person is not stripped bare.They are left with enough in personal assets to survive in the world.They are not thrown in prison, nor do they become automatic victims of being socially outcast. Obviously, bankruptcy destroys a person's ability to easily obtain a decent credit limit with a bank until they build up some sort of trust with the financial world by proving over time that they are able to handle their monetary affairs properly.As one way to look at it, the person restarts their financial history to where they may have been as a teenager; with a low credit limit and high interest rate.
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