In many countries a company or business can "file for bankruptcy protection" so that creditors cannot destroy all of the physical capital and goodwill by breaking it apart and moving it away. All this provides is more time to work out a new deal between the owners and the people the business owes money. Often bankruptcy allows borrower to protect his personal belongings from creditor. After filing for bankruptcy and proving that he cannot pay off the debt, he will be freed from the liability to pay it off but it will be limited to borrow money again.
Often a creditor threatens a debtor with debt slavery in many parts of the world. In some cases the debtor does not know that they have a right to go bankrupt. This is a human rights problem in some countries. Also, some creditors continue to harass a debtor even though bankruptcy laws say they should not, hoping that the debtor will pay them money that they do not deserve.
United States[change | change source]
Chapter 7 of the Title 11 of the United States Code (Bankruptcy Code) can be filed by businesses or individuals. It is also called liquidation bankruptcy because some of a debtor's property may be sold (liquidated) to satisfy creditors. Chapter 13 is the most popular form of bankruptcy in the United States. When a business is in debt and cannot pay it, it may ask or be forced to file bankruptcy in court under Chapter 7. A chapter 7 usually makes a company stop doing business. Employees often lose their jobs when company files for chapter 7. When chapter 7 is filed, the trustee is chosen. The trustee is in charge of managing the business and selling its assets to pay the creditors.
References[change | change source]
- Rick Noack (18 November 2014). "Map: The world’s 36 million slaves". The Washington Post. http://www.washingtonpost.com/blogs/worldviews/wp/2014/11/18/map-the-worlds-36-million-slaves/. Retrieved 30 June 2015.
- "What Is Bankruptcy?". NOLO. http://www.nolo.com/legal-encyclopedia/chapter-7-13-bankruptcy-basics-29829.html. Retrieved 30 June 2015.
- "11 U.S. Code § 109 - Who may be a debtor". cornell.edu. http://www.law.cornell.edu/uscode/text/11/109. Retrieved 1 July 2015.