What is Bankruptcy and How Can it Be Avoided?

What is bankruptcy? The basic definition of bankruptcy is when a person, upon voluntary invocation or one brought about by the person's creditors, is judged legally broke. The person's remaining property and debts owed for each is then calculated for the creditors or is distributed among them.

During a bankruptcy, all of the debts that are held under the bankruptcy (which is all real property, vehicles, loans...) are protected under an umbrella whereas the creditors can't pursue further collection efforts for the moneys owed to them. That means that they can't come after you for the money if you are making your bankruptcy payments on time every time.

What that also means is that if you miss your bankruptcy payments (which are usually a combination of all the missed payments, late fees, legal fees, court fees, and trustee fees) or you miss a regular payment on your mortgage or vehicle payment, the lender can have their lawyer request a Stay of Relief and pull your property out from under the umbrella of bankruptcy, propelling it back toward foreclosure.

What is bankruptcy and how it works is explained more on the next page.