Bankruptcy, which is outlined by laws in the United States Bankruptcy Code, allows a debtor, who has debt obligations which have exceeded their ability for repayment, to terminate contractual debt obligations with their creditors, potentially develop a plan of debt payment reorganization and avoid litigation. The goal is to allow the debtor a fresh financial start while distributing the debtor's remaining assets to creditors as equitability as possible. Bankruptcy can be a voluntary or involuntary process forced on the debtor by their creditors.
Parties of interest can include:
Debtor - the debtor can be an individual, business, married couple, partnership or corporation which owes another entity payment for goods or services.
Creditors - the creditor can be any entity which has a claim or debt owed to them which occurred prior to the debtor filing the bankruptcy petition.
United States Trustee - The United States Trustee is part of the Department of Justice and they are responsible for making sure the bankruptcy process is performed according to United States bankruptcy laws.
Equity Security Holders - Equity Security holders can include shareholders of corporate stock who have a stock or similar security in the corporation or who are a limited partner in a limited partnership.
Trustee - A trustee is assigned by the bankruptcy court to represent the interests of the creditors in the bankruptcy process. In Chapter 7 Bankruptcy proceedings the trustee will liquidate the debtor's non-exempt assets and use the money to repay the creditors. In a Chapter 13 Bankruptcy process the trustee administers the Chapter 13 Bankruptcy repayment schedule.
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