Define: Bankruptcy Act

The Bankruptcy Act is a federal law that provides a legal framework for individuals and businesses to declare bankruptcy and seek relief from their debts.

Both individuals and businesses can file for bankruptcy under the Bankruptcy Act. However, there are specific eligibility criteria and different types of bankruptcy options available for each.

The Bankruptcy Act provides for different types of bankruptcy, including Chapter 7 (liquidation), Chapter 11 (reorganisation), and Chapter 13 (individual debt adjustment).

Chapter 7 bankruptcy involves the liquidation of the debtor’s assets to repay creditors. Certain exemptions may apply, allowing the debtor to keep essential assets. Once the assets are liquidated, the remaining debts are typically discharged.

Certain assets may be exempt from liquidation under Chapter 7 bankruptcy, such as a primary residence, necessary clothing, and tools of trade. However, non-exempt assets may be sold to repay creditors.

Chapter 11 bankruptcy is primarily designed for businesses and allows them to reorganize their debts while continuing their operations. It involves creating a repayment plan approved by the court.

Yes, individuals can file for Chapter 11 bankruptcy, but it is less common and typically used by high-income individuals with substantial debts.

Chapter 13 bankruptcy allows individuals with a regular income to create a repayment plan to pay off their debts over a period of three to five years. It is often used to prevent foreclosure or repossession of assets.

Not all debts can be discharged through bankruptcy. Certain debts, such as child support, alimony, most tax debts, and student loans, are generally non-dischargeable.

Bankruptcy can stay on your credit report for up to 10 years, depending on the type of bankruptcy filed. However, its impact on your credit score may lessen over time as you rebuild your credit history.