What is Bankruptcy

Many people have heard the word bankruptcy but do not know the meaning of the term. This is because it is a very complex meaning and cannot be understood very easily. There are various versions of a bankruptcy and this article will explain the personal as well as business bankruptcy in detail. When a person says bankruptcy, it can mean either individual bankruptcy or firm bankruptcy.

When you are bankrupt, you will have to file a claiming stating that you are bankrupt. This is very important as the government should declare you bankrupt and this cannot be self declared.

The types of bankruptcy are as follows.

  • Personal bankruptcy- this is a bankruptcy under which, the person does not have any amount of money to repay the credits that he owes. This tells that the person has to sell all his assets and property to dispose off his loans and credits. However, the person can hold back a part of his assets and make a repayment plan under which he will explain all the repayments he will make in the following years.
  • Business bankruptcy- this is a type of bankruptcy under which, the company is not able to pay back its creditors due to zero balance in the bank account. This calls for the selling of assets of the business and paying back all the creditors and lenders.
  • Firms- this is a type of bankruptcy in which, the owners of the firm are liable to pay off the creditors and loaners by disposing their personal property. This liability clause is mentioned in the business papers. This means that the liability of the owners is unlimited and extends to the personal property.
  • Joint stock company- this is a type of bankruptcy under which, the members of the company is not liable to pay the creditors from their personal property. This means that their liability towards the company is limited to the assets of the company.

As mentioned earlier, the government will allow the person to file himself as a bankrupt even though he has a few properties in hold. These things are exempted in the bankruptcy. These two items are his vehicle and the tools and equipment he uses for this work and occupation.

While you want yourself to be declared as bankrupt, you should file an application with the help of a lawyer. The procedure to file a bankruptcy claim is the same for both the types of bankruptcy. The knack stays in getting a good bankruptcy lawyer so that he gets the best deal for you and you business without any further delay.