Bankruptcy offers options to individuals unable to pay back their debts. Here is personal bankruptcy explained. The most common choices are the liquidation of a debtor’s assets and the reorganization of his debts.
Bankruptcy is the legal status of a person or business that cannot repay debt owed to creditors. Depending on the details, a person may file chapter 7 or chapter 13 bankruptcy. Over sixty five percent of bankruptcies are chapter 7, where the bulk of a person’s assets are sold with the proceeds going to his/her creditors. Creditors may not possess certain personal items of the debtor, such as a suit for job interviews and the debtor’s bed. Chapter 13 bankruptcy involves consolidating debt under one creditor and working out a plan and time-frame for repaying it. Both forms of bankruptcy affect a person’s credit report for many years.