Welcome to professrsavings.com, we teach finance basics.
Today we will teach you bankruptcy in about two minutes.
Bankruptcy. We all heard of it. Celebrities that buy cars or yachts they can’t afford.
Bankruptcy is the legal state of an individual or corporation that has become insolvent.
That’s a big word but in simply words means you can’t repay outstanding debts.
Many types of bankruptcy filings such as Chapter 7 and 11. Today we are just going to cover a light overview.
A light overview of bankruptcy is that it is first a petition is filed by the borrower which is the most common method.
Petition is filed on behalf of the creditors.
It essentially offers individuals and businesses a chance to hit the reset button by forgiving debts that are unable to be paid while also offering creditors some form of repayment.
Let’s say Professor Savings owns a few cupcake stores that operating but losing money the past three years. He recognizes that she is not able to pay his bills and decides to file for Bankruptcy.
All of the assets of his assets in the bakery business are decided and evaluated by the court. and then Some of the assets may be used to repay a portion of his outstanding debt.
Professor Savings creditors agree to restructure his payment plan allowing his to pay them a smaller amount each month over a seven year period.
This prevents him for instance from experiencing foreclosure or shutting down until the seven year term has expired.
A record of Jane’s bankruptcy filing could stay on his credit report for up to 10 years which may scare off lenders so consider this your last option.