Bankruptcy can either be entered into voluntarily by the debtor or involuntary initiated by the creditor. After the petition is filed creditors are generally prohibited from seeking fulfillment of their debts outside of the bankruptcy proceedings.
Bankruptcy also allows debtors to be free from their debts or for them to be discharged. After the assets are distributed the debtor can be discharged from past financial obligations even if all of the creditor's debts have not been completely paid. The debtor is given financial relief while the creditor is given a sense of certainty as to the amount and time of payments. This sounds scary…but in the vast majority of Bankruptcy cases, the debtor does not lose any assets. This is done through Federal and/or State exemptions.
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