Bankruptcy is a financial condition in which a person or a firm is not able to pay off or clear its debts. It is an honest attempt of the company or the individual to try and rebuild his/her financial condition by filing for bankruptcy. While the debtor is cleared of all debts, the creditor is paid back with money attained by selling off the non exempted assets of the debtor. In the case of multiple creditors the rearrangement of the assets among the creditors is done by the federal court. Bankruptcy is the final recourse a person could make to restart his financial status. And on many occasions it proves to be the only option.

When you apply for bankruptcy you need to file an appeal declaring your financial status in the federal court. A creditor can also initiate this process if he feels that this would be the only way he could recover outstanding debts. In cases where the person files his/her own bankruptcy, it is called a voluntary bankruptcy. In cases where the bankruptcy is filed by the creditor, it is known as involuntary bankruptcy.

As defined by the court of law, the three major types of filings made for bankruptcy are under Chapter 7, Chapter 11 and Chapter 13. While Chapter 7 and Chapter 13 are generally for individuals, Chapter 11 filings are generally made by companies that cannot repay their debts. Each of these chapters has special conditions. Chapter 7 includes the liquidation of all the non-exempt and their eventual distribution among the creditors. Chapter 13 comparatively helps the debtor save some assets and repay the debt in approximately three to five years time. Chapter 11 is more complicated as it has a certain amount of secured and unsecured debt that a person or company should have in order to qualify for application. However some debts cannot be removed by filing bankruptcy such as student loans and tax debts.

Bankruptcy can be quite an unpleasant experience, especially when you know that the burden of the bankruptcy will stay with you for 10 years and your credit rating will be permanently damaged. This will make getting a loan of any type for the next 10 nearly impossible without exorbitant interest rates. So consider bankruptcy as your last option.

Zumbru can help you avoid bankruptcy by consolidating your outstanding debts. Fill out the form today to get started on your way to financial freedom.