What is bankruptcy and what does it mean?
Bankruptcy: a primer Some familiar names of late have filed for bankruptcy protection: Circuit City, Magna Entertainment, Ritz Camera Centers, Baltimore Opera Company and The Greenbrier resort. And there is talk among government and auto officials that General Motors could be next. Debtors file for protection under one of several chapters of the bankruptcy code. Family farms and fishermen, for instance, file under Chapter 12; municipalities use Chapter 9. And the newest chapter, 15, applies to debtors and creditors from more than one country. Here are the most common chapters used by consumers and businesses: Chapter 7 Immediately staves off creditors, while the assets of a company or individual are liquidated and the proceeds used to pay off creditors. As part of 2005 bankruptcy reform, individuals whose monthly income is above the state median – $4,629 in Maryland – must pass a means test to file under Chapter 7. Also all individuals, no matter what bankruptcy chapter, must undergo c
Bankruptcy is when your debts exceed your income or assets.
When someone reaches a state where their income is no longer sufficient to meet their obligations (like when a couple has both been working, incurred debts then one gets laid off or injured) then bankruptcy can be filed.
