Bankruptcy- This is a legal process under Federal statutes that provides for rehabilitation of a debtor through the discharge of certain debts or through a debt repayment plan over a certain period of time. Creditors cannot contact the debtor during the bankruptcy. They must wait until it is fully discharged.
There are three chapters of bankruptcy:
Chapter 7: This chapter of bankruptcy law provides for a full liquidation of an entity's non-exempt property to satisfy creditors, and discharges all dischargeable debts.
Chapter 11: This chapter of the bankruptcy law provides for a partial payment of some debts and the partial discharge of some debts belonging to a business.
Chapter 13: This chapter of the bankruptcy law provides for the partial payment of some debts and the partial discharge of some debts for an individual. It is also known as the Wage Earner's Repayment Plan since all creditors must receive a dividend.
Further Reading:
Tax Foreclosure
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