Why do people file for bankruptcy?

Why do people file for bankruptcy?

Rudolph W. Giuliani’s decision to file for bankruptcy May give former New York mayor some time to settle his debts — including the $148 million in damages he owes two former Georgia election officials for spreading lies that they had attempted to steal the 2020 election from former President Donald J. Trump.

However, this will not necessarily make the jury prize disappear.

What is the purpose of filing for personal bankruptcy?

A personal bankruptcy, like a business bankruptcy, generally freezes any pending litigation or attempts by creditors to collect a debt. Given that, it’s no surprise that Mr. Giuliani filed for bankruptcy a day after a federal judge ordered him to begin paying damages awarded to former election workers. A deposit can damage a person’s credit score, making it difficult for them to get a loan or buy a property later.

What is the advantage of declaring bankruptcy?

Individuals declare bankruptcy when their debts exceed their assets and they see little hope of reversing this situation in the near future. A bankruptcy filing is intended to give an individual breathing room to get their affairs in order and, usually, develop a plan to pay their creditors.

The ultimate goal of bankruptcy is to give the debtor a “fresh start,” so that the individual is not forever burdened by these responsibilities. In Mr. Giuliani’s case, court documents generally put his assets at between $1 million and $10 million and his debts at nearly $153 million.

Who are the creditors in the event of personal bankruptcy?

Creditors are people, institutions or businesses to whom an individual owes money. When filing for bankruptcy, creditors’ claims are generally listed in order of who gets paid first. So-called secured creditors, who are potentially at the top of the list, are companies or individuals who have a claim against a debtor regarding property. In personal bankruptcy, the most common secured creditor is a bank holding a mortgage on a property.

All other claims in bankruptcy are considered unsecured, but some are considered to have “priority” status for payment. Generally, all taxes owed by an individual are classified as priority debts. Mr. Giuliani, in his filing, said he owed nearly $1 million in income taxes to the Internal Revenue Service and the state of New York.

Most debts owed by an individual will be listed as unsecured debts without priority status.

Mr. Giuliani has not listed any guaranteed claims. His filing listed a number of unsecured and nonpriority debts, including the $148 million jury award. It also listed approximately $3 million in debts owed to attorneys as nonpriority unsecured claims.

What happens to a person’s debts in bankruptcy?

Most personal bankruptcies result in the formulation of a payment plan in which an individual will make payments to certain creditors at a reduced rate. Typically, creditors included in a payment plan will only receive a portion of what they are owed.

Some debts in bankruptcy can be discharged, meaning the person does not have to pay them. These often include credit card debt, medical debt, and loans not secured by property.

A mortgage can be discharged in bankruptcy, but usually the individual will lose title to their home. The same goes for a car loan. Child support, student loan payments, criminal penalties, and income taxes generally cannot be discharged in bankruptcy.

Some civil judgments can be partially annulled. But a judgment involving malice cannot be overturned, and in Mr. Giuliani’s case, the jury’s award in favor of the former election workers may fall into that category.

Lindsey Simon, a professor of corporate and bankruptcy law at the University of Georgia Law School, said Mr. Giuliani would probably not be able to release the jury award. But she said filing for bankruptcy could give her time “to reach a settlement.”

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David B.Otero

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