What Is The Purpose of Bankruptcy?
What Is The Purpose of Bankruptcy? Generally, bankruptcy is a legal process where the debtor is discharged from all his/her debts and allowed to start anew with a fresh start. The primary purpose of bankruptcy is to provide an honest debtor with a new opportunity. However, it also helps the creditors to receive repayment. There are two types of bankruptcy cases, namely bankruptcy Chapter 7 and Chapter 12. Both of these are based on the same principle. In either case, the trustee is appointed to liquidate nonexempt property and disburse the proceeds to the creditors. Then, the debtor proposes a repayment plan to repay the debt. The court accepts the plan if the creditors approve it. The plan cannot exceed three years. The bankruptcy law has evolved to help individuals and businesses overcome their financial troubles. It allows them to restructure their businesses and to continue operating. It also protects the going concern value of the firms in financial distress. It ...