Tax Law Term “Bankruptcy“
Bankruptcy is a Federal statutory procedure by which a person is relieved of most debts. Liquidation and rehabilitation are two general types of bankruptcy. The terms “bankruptcy” and “Chapter 7 bankruptcy” are used to describe liquidation cases under Chapter 7 of the Bankruptcy Code. The vast majority of bankruptcy cases are liquidation cases, under which non-exempt property, if any, is surrendered to the trustee, who converts the property into cash and distributes the net cash to creditors. Chapters 11, 12, and 13 of the Bankruptcy Code provide for debtor rehabilitation in which creditors are paid out of future earnings of the debtor to satisfy the claims. Tax aspects of bankruptcy are very important to taxpayers who file for bankruptcy. The automatic stay of bankruptcy may stop a wage garnishment or bank account levy. In many cases, taxes which have been due for more than three years before the petition date may be discharged in bankruptcy.
Bankruptcy is a legal status of a person or other entity who cannot repay debts to creditors. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor. Wikipedia
Bankruptcy helps people who can no longer pay their debts get a fresh start by liquidating assets to pay their debts or by creating a repayment plan. Bankruptcy laws also protect financially troubled businesses. This section explains the bankruptcy process and laws. United States Courts
Foreclosures and excessive debts are a homeowner’s worst nightmares come true. Many believe bankruptcy to be the perfect solution for these problems. But, that’s where people get trapped. Bankruptcy stays on your credit record for quite a long time, making advancing in life incredibly difficult. In addition, the updated bankruptcy law, passed in 2005, includes severe restrictions that make it more complicated to file for bankruptcy. Investopedia