Appendix B. Bankruptcy FAQs
This appendix includes 26 of the most frequently asked questions we get about what bankruptcy is and how it works. These are abbreviated answers, so be sure to refer to the main text for more information on any of these topics.
What is bankruptcy?
Bankruptcy refers to a federal code of laws and rules designed to help debtors who have more debt than they can handle. Most notably, bankruptcy laws may provide for some debt forgiveness and typically require that creditors stop all collection efforts against the debtor while the debtor is working out a plan or awaiting a discharge of debts. The bankruptcy laws require that the debtor make full disclosure of all assets, liabilities, and other financial information and either surrender nonexempt assets for liquidation and distribution to creditors or formulate and follow through on a plan of reorganization and debt repayment. Bankruptcy cases are heard and settled by the bankruptcy court, a federal court that is a unit of the U.S. District Court.
What are the different "chapters" in bankruptcy for an individual?
Chapter 7 is the liquidation chapter of the Bankruptcy Code. Chapter 7 cases may be filed by an individual, a corporation, or a partnership. The individual debtor usually receives a discharge, which means that he or she is relieved of the obligation to pay certain types of debts (corporations and partnerships ...