The main purpose of bankruptcy laws is to give people hopelessly overburdened with debt a financial fresh start. Bankruptcy filings are public records. However, under normal circumstances, no one will know about the bankruptcy. Credit Bureaus will maintain a record of the bankruptcy and it will remain on the credit record for 10 years.

The most common reasons for bankruptcy filings are unemployment, large medical expenses; seriously overextended credit; marital problems, and other large unexpected expenses.

There are two ways a debtor can go bankrupt. The first and most common way is for an individual to file a voluntary petition asking the Court to allow bankruptcy. The second, and rarely used way, is for creditors to ask the Court to make an Order that a person is bankrupt. In this way, a creditor can gain payment, at least in part, for debts a debtor is refusing to pay. In both these cases a Bankruptcy Trustee is required to administer the bankruptcy.

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Bankruptcy is a legally declared inability of individuals or businesses to discharge their debts. A declared state of bankruptcy can be requested not only by creditors in an effort to get what they are owed but also by the insolvent individual or organization. If it is difficult to repay debts, declaring the bankruptcy may be the right solution to debt problems.

Out of six basic types of under the Bankruptcy Code, Chapter 7 is a “liquidation” of nonexempt assets to pay debts. In a court-supervised procedure, a court appoints a trustee who liquidates the non-exempt assets of the debtor’s estate and makes distributions to creditors. The Bankruptcy Code allows the debtor to keep certain exempt property; but a trustee will liquidate the debtor’s remaining assets.
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From the beginning of the history of money, there were people lending money from other people. To state the terminology: When someone lends money that person is called the Debtor. And the person who gives away the money is called the Creditor. The debtor now owes the money he / she borrowed. Now there is a problem here. That is, what happens if the debtor cannot pay back the money to the creditor on time? If we look into the early history, in this kind of situation, in Ancient Greece there was a practice of slavering away the debts. That means, the debtor and his family becomes slaves to the creditor, and do whatever work until the creditor says that his debts are over. And later, in early 1800s’ there was notion called “debtor’s prison”, which means, if you can’t pay back the money, you go to prison that was built specifically for debtors. You can’t come out of prison until your family or friends pay off the money your creditor owns. This might be worse than being a “debt slave”. Because, what if your family or friends can’t or won’t pay your creditor? You might have to be in prison for your entire lifespan. Being a “debt slave”, at least you have the chance to work away your debts.

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