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What is Bankruptcy?
Bankruptcy is a legal process designed to help individuals and sole traders who are unable to pay their debts. It is a legal recognition that a person or entity is unable to meet their financial obligations to creditors.
How does Bankruptcy work?
The bankruptcy process typically begins when an individual files an online petition with the court. The court will then issue an order, known as a bankruptcy order, which declares the individual bankrupt.
Once the bankruptcy order is issued, a trustee will be appointed to manage the bankruptcy proceedings. The trustee's role is to take control of the bankrupt person's assets, sell them, and use the proceeds to repay the creditors as much as possible. The trustee will also investigate the bankrupt's financial affairs, including their assets, liabilities, income, and expenses.
During the bankruptcy process, the bankrupt person is subject to certain restrictions and obligations. For example, they may be required to provide the trustee with regular updates on their financial situation, and they may be required to make regular payments to their creditors.
Bankruptcy can have serious consequences for the bankrupt person. It can affect their credit rating and their ability to access credit in the future. It can also impact their ability to own property or run a business.
However, bankruptcy can also provide a fresh start for individuals who are struggling with unmanageable debt. It can help to eliminate or reduce their debts and provide a pathway to financial recovery.
