What is bankruptcy? What are the most common types of bankruptcy?

What is bankruptcy? What are the most common types of bankruptcy?

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May 30, 2022
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What is bankruptcy? What are the most common types of bankruptcy?

Answer and ExplanationSolution by a verified expert

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Selling of assets and paying off liabilities of the bankrupt entity is known as liquidation.

Explanation
When a person or an organisation becomes bankrupt and no longer able to pay and settle its debts fully, then the legal process is followed for the settlement of the debts of the creditors is known as bankruptcy.

The various form of bankruptcy are as follows:

Chapter 7: This is most common form for the individuals or corporations in which the operations of the business are completely stopped and the liquidation of the assets are conducted to pay the debts of the creditors.
Chapter 11: In this form, the creditors are asked to give the sometime to the entity, which becomes bankrupt so that it can reorganise itself and settle its required debts.
Chapter 13: In this, the reorganisation is arranged rather than liquidation and the regular payment is made by the entity to the creditors to also provide some relief to them.
Verified Answer
The process of getting the assets distributed among the creditors in an orderly manner from a debtor is known as bankruptcy, and there are various bankruptcy types such as Chapter 7,11 and 13.

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