Bankruptcy is a legally declared inability or impairment of ability of an individual
or organizations to pay their creditors. Creditors may file a bankruptcy petition
against a debtor ("involuntary bankruptcy") in an effort to recoup a portion
of what they are owed. In the majority of cases, however, bankruptcy is initiated
by the debtor (a "voluntary bankruptcy" that is filed by the bankrupt individual
or organization).
The primary purpose of bankruptcy is: to
give an honest debtor a "fresh start" in life by relieving the debtor of most
debts, and to repay creditors in an orderly manner to the extent that the debtor
has the means available for payment. Bankruptcy allows debtors to be discharged
from the legal obligation to pay most debts by submitting their non-exempt assets,
if any, to the jurisdiction of the bankruptcy court for eventual distribution
among their creditors. A bankruptcy case is initiated by the filing of a
petition, which contains the Debtor's financial information. A married couple may
file a joint petition. Though in a technical sense the filing of a joint petition
initiates two separate bankruptcy cases (and estates), the cases and estates
are usually consolidated and treated as one. |
