Types of Bankruptcy
The debtor is requesting that he/she give up all property and, in return, be exempt from all liability.
However, the debtor can keep a significant portion of his/her assets intact.Chapter 13 Payment plan (personal)
The debtor is requesting that he/she keep all property but reduce his/her debt, which will be paid back in a given period of time.Chapter 11 Deferred debt (corporate)
The debtor is requesting that he/she does not pay any of his/her debt for a given period of time and that his/her business maintain its status quo. This type of bankruptcy is generally requested by a large corporation, and in such a case, the debt can be deferred for up to a period of 5 years.
Effects of Bankruptcy
The purpose of bankruptcy is the settlement of debt and a new start. Debts are generally divided into secured debts (which include residences, vehicles, equipment, etc.) and unsecured debts (credit cards, loans, cash from goods, bonds, etc.).The purpose of bankruptcy is to apply for exemption from all such debts.
Interruption of litigation proceedings
Another purpose of bankruptcy is to interruption the proceedings of any ongoing litigation. Bankruptcy is under federal law, but litigation is under state law. According to law, the initiation of a federal law interrupts any state law. Therefore, any ongoing litigation is interrupted when an individual files for bankruptcy. Any other civil litigation is also interrupted. However, criminal litigation is not interrupted.
- Litigation proceedings related to fraud, defamation, compensation for damages as a result of assault, compensation for damages as a result of drunk driving, and other such cases are not subject to interruption even with the filing of bankruptcy.
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