Bankruptcy is defined as legal situation in which a debtor cannot fulfill their monetary obligations. Debtor bankruptcy is when the person who owes the money files for it. There are six types of debtor bankruptcy, but the two most common are Chapter 7 and Chapter 13. Chapter 11 bankruptcy is for businesses
Chapter 7 is called liquidation, and it is where an individual surrenders their assets to a trustee who distributes the proceeds to the persons owed. Chapter 13 is where the debtor retains all of their possessions but promises to surrender a portion of their earnings in the future to the creditors. Sometimes the company or person who is owed the money will file bankruptcy against the debtor, called involuntary bankruptcy. Debtor bankruptcies give the person or company a new start financially, but the only fiscal obligations that are not included in this are student loans.
Basically, debtor bankruptcy completely wipes the persons slate clean of any money that is owed including credit cards or mortgages. However, their credit is completely damaged and they need to start building that up again as well. Chapter 7 bankruptcies are only allowable once every eight...
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