Online Legal Glossary Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Online Legal Glossary, written in plain English, along with examples of how it is used.
What is Online Legal Glossary?
Request to the court for a fresh start that an individual or business can make when they cannot pay their debts. Different types of bankruptcy chapters exist, including Chapter 7, Chapter 11, and Chapter 13. Special bankruptcy judges preside over these proceedings.
History and Meaning of Bankruptcy
Bankruptcy is a legal process through which individuals or businesses can find relief from their debt obligations. It has its roots in ancient civilizations such as Greece and Rome, where debt relief laws were enacted to prevent debtors from becoming enslaved to their creditors. In the United States, bankruptcy is codified in federal laws that provide different chapters under which bankruptcy can be filed. The most common types of bankruptcy are Chapter 7, Chapter 11, and Chapter 13.
Chapter 7 bankruptcy is also known as liquidation bankruptcy, where a debtor's assets are sold to pay off creditors. Chapter 11 bankruptcy is used by businesses to restructure their debts and remain open while paying off their obligations. Chapter 13 bankruptcy is used by individuals to restructure their debts while keeping their assets and paying off their obligations through a repayment plan.
Bankruptcy proceedings are overseen by a special bankruptcy court and judges who have expertise in this area of the law.
Examples of Bankruptcy
John filed for Chapter 7 bankruptcy, and his non-exempt assets were liquidated to pay off his creditors.
ABC Inc. filed for Chapter 11 bankruptcy to restructure its debts and remain open for business.
Mary filed for Chapter 13 bankruptcy to restructure her debts and keep her house and car.
Legal Terms Similar to Bankruptcy
Insolvency - a state where an individual or business cannot pay its debts as they come due.
Debt settlement - an agreement between a debtor and creditor to pay off a debt for less than the full amount owed.
Foreclosure - a legal process where a lender takes possession of a property due to a borrower's failure to make payments on a mortgage or loan.