What are the laws governing bankruptcy?
In Washington, bankruptcy is governed by federal law. Bankruptcy is a legal process that allows individuals and businesses to reorganize or liquidate their assets to pay off debt. It is important to understand that filing for bankruptcy does not always mean that all debts are eliminated. The two most common types of bankruptcy for individuals are Chapter 7 and Chapter 13. Chapter 7 bankruptcy is a liquidation where debtors can get rid of certain unsecured debts, such as medical bills, credit card debt, and personal loans. In contrast, Chapter 13 bankruptcy is a reorganization, allowing debtors to create a repayment plan with creditors. This plan sets forth a timeline to repay debts over the course of three to five years and may also help reduce the amount of debt owed. Businesses can file for bankruptcy under either Chapter 7 or Chapter 11, depending on their type and size of debt. Chapter 7 bankruptcy results in a business’s assets being liquidated in order to pay off creditors. Chapter 11 bankruptcy allow businesses to reorganize their debt and develop a repayment plan. In both cases of individual and business bankruptcy, debtors must adhere to the laws governing bankruptcy to ensure they receive the full benefits of their filing. Individuals must pay a filing fee, attend credit counseling classes, and provide the court with financial information, such as income, expenses, and assets. Businesses must file a petition and provide detailed financial information in order for the court to approve their repayment plan.
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