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Often, we might have heard the word bankruptcy and even use it in our day-to-day conversations. Have you ever sat down to think of what bankruptcy is? Do you think it is a good thing? Have you researched it? What does bankruptcy mean to you?
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If all of these questions have been ringing in your head, then you are in the right place as I will be telling you everything you’d need to know about bankruptcy. Stay glued!
What Is Bankruptcy?
A lot of times, when people use the word bankrupt, the idea that comes with it is just one explaining that a person does not have money at a particular time. So, for example, when someone does not have funds in his account, he says he is bankrupt!
Do you think this is what bankruptcy is? Bankruptcy is a point where there are no funds again, and then debt is attached. I do hope this is clear enough because you might not have money and not be in debt, but if there is no money and you owe a lot of people outside, then you can say you are bankrupt.
Bankruptcy has different types, which I’ll show you now.
Types Of Bankruptcy
There are different types of bankruptcy, and anybody can find his/herself in such situations. The various types of bankruptcy include:
Liquidation
Liquidation is a type of bankruptcy whereby you must forfeit some important belongings to pay your debt. Let me paint a scenario; you do not have money, you’re in debt, but you have properties or stuff that can make up for your debt outside! All that is needed to be done is to involve a lawyer who would back up the process legally, and in no time, you would be free from your debt, but you have given your belongings out.
Repayment plan
A repayment plan is a situation where the court forgives the individual and does not allow him to sell off his belongings to pay his debt. The court gives him/her a particular time to pay his debt. It could be in 1-3 years, depending on the debt. This could sometimes be referred to as a fair judgment.
Large reorganization
This is a point when a business is in debt, and then they are trying to organize the business activities so that the process can go on and pay their debt alongside. This can be similar to a repayment plan because this type of bankruptcy involves a business organization.
Family farmers
This type of bankruptcy involves the court allowing you to allow farmers or other people involved in the different types of farming to pay your debt. This cannot be done so easily, except you have people who engage in farming and are willing to help.
Now that you have seen some of these, I believe you know about bankruptcy and the various types of bankruptcy.