Allowance to meet financial obligation to be the most excused for repay all of debt when the business could not go is bankruptcy. This is the worst way but it can survive you when business meets the dead end. Bankruptcy has been in existence for long time. In USA, there are governed the rules and procedures for filing bankruptcy by the federal law. We can devise the bankruptcy to be two types of bankruptcy which are in a liquidation bankruptcy and in a reorganization bankruptcy. Both are different in detail. Debtors surrender their property to be sold and proceed distributed to creditors and all debts are discharged permanently in a liquidation bankruptcy while in a reorganization bankruptcy, debtors are allowed to keep their property but they have to agree on installment plan for repay to creditors with agree amount of a portion by they owe.
In fact that filing for bankruptcy is not free, the fee is around USD 300 for most personal bankruptcy which has to submit a petition to bankruptcy court. In the paper of petition, it will contain sworn statement shown the amount of money of debtors which they concern which is combining with their income and expenses and list of their assets. After issue the papers to court, a court hearing will hold for review the information in the petition. Chapter 7 bankruptcy is the most common in which the debtors must turn their all non-exempt property over to bankruptcy trustee, a supervising office. Some property can be exempted if it falls in the specific categories of assets that debtors are allowed to keep for the example, a certain amount of cloths, household items, tool for work and some instances, vehicles of family home.
Trustee will take the debtor’s non-exempt property and sell it to the market. After selling, the money will be paid to the creditors which the result normally turns that the creditors receive a small fraction of their claim and the balance of the debtor’s loan are forgiven and never be collected. And the law force the creditors to severe penalties if they attempt to collect debts from debtor under the federal law.