A friend knows “someone” in financial difficulty and asks you to explain how bankruptcy process is...

A friend knows “someone” in financial difficulty and asks you to explain how

bankruptcy process is initiated, what happens when in bankruptcy, the

consequences to secured creditors, general creditors and governmental

creditors, and the consequences to the debtor.

Expert Solution

The bankruptcy process is initiated by filling out a form where the professional administers begin the process with filing fees of approximately $330. Then proper meetings are attended by the creditors and court-appointed bankruptcy trustee where most of the debt is discharged after considering the different perceptions. The trustee provides the financial statements of debtor to creditor and manage debtors assets.

After the bankruptcy, consequences to creditors are that creditor is prohibited from taking any legal action which results in collecting of debt or assets from the debtor. Under the permission from the bankruptcy court, a secure creditor, government creditor, and general creditors can ask for the automatic stay to have foreclose its security interest in the collateral. The debtor's consequences are that it will lose all the property rights, and negative bankruptcy information is filed against the debtor even after ten years of the filing date. At least for the eight years, the debtor will not be able to file again for bankruptcy.

keosha answered 1 year ago

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