“Bankruptcy” is term that describes a legal process individuals and businesses go through because they are not able to pay the debts they owe. The legal process is governed by federal law, not state law. However, certain parts of the process can be affected by an individual state’s laws. For example, if someone owns a home that has accumulated equity over time, the amount of equity that this person can “save” or keep out of the bankruptcy proceeding, varies among the fifty states. Someone who files for bankruptcy can exempt, from the total-available assets with which the trustee can liquidate and pay creditors, a certain portion of this home’s equity.
Throughout the United States, there are 94 federal bankruptcy districts where cases are filed. The federal district having jurisdiction over residents of Montgomery County is located in Philadelphia, where the case will be filed and the court is located.
The intent of the bankruptcy legal framework is to allow individuals to get a “fresh start” on life by liquidating assets to pay their debts or by structuring a plan to repay these debts.
A business, that is likewise unable to pay its creditors, can use the bankruptcy laws to arrange payments to creditors through a liquidation process or a reorganization process.