What does it mean to declare bankruptcy
What does it mean to declare bankruptcy?
To declare bankruptcy means you file a court proceeding in the United State Bankruptcy Court for the district that is appropriate for you based on your residence.
In the court documents, you list your debts and assets, and some other information, and you notify all of the people you owe money to that you can’t pay them, and that they are entitled to receive, for the most part, only what is available through the bankruptcy court proceeding. In a nutshell, you sue everyone you owe money to, and you tell them you have no money to pay them while at the same time the people you owe are forced into accepting the bankruptcy outcome.
In exchange for this court filing, you get relief from the debts, most permanently, some temporarily. To the extent you have assets above a certain value in certain categories of property, that property will be liquidated to pay some portion of your debts. In the majority of personal bankruptcy filings, no property is liquidated.
This is what filing or declaring bankruptcy is, but what does it do?