Understanding Bankruptcy

When an individual or organization becomes unable to pay their creditors, they can become legally declared as bankrupt. Bankruptcy law allows for such an individual or organization to develop a plan to resolve their debts by the means of division of their assets among creditors. The execution of such a plan allows all creditors interests to be fulfilled to some degree.

A debtor can also enter into bankruptcy to free themselves of debts to creditors they have accumulated. Once assets have been distributed among creditors, a debtor can then be released from their financial obligations, even when the debts have not actually been fully paid.

Bankruptcy law is a federal statutory law, with proceedings litigated and supervised in the United States Bankruptcy Courts (part of the District Courts of The United States). Supervised proceedings enable a debtor use revenue generated while remaining in business to resolve their debts.