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Simple English definitions for legal terms
insolvency law
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A quick definition of insolvency law:
Insolvency law is a set of rules that helps people who can't pay their debts. It's sometimes called bankruptcy law. It helps debtors by giving them relief from their creditors. Bankruptcy is a legal process where a debtor can get financial help and their assets are either sold or reorganized to pay off their debts. There are different types of bankruptcy, but the most common are liquidation and rehabilitation. Liquidation means selling off assets to pay creditors, while rehabilitation means the debtor keeps their assets and pays off their debts over time. Insolvency law also deals with the rights of creditors and debtors. If someone declares bankruptcy, they are considered to be insolvent. Insolvency means that someone can't pay their debts. The word bankruptcy comes from an old Italian custom of breaking the counter of a failed merchant.A more thorough explanation:
Insolvency law is a set of rules that helps people who cannot pay their debts to get relief from their creditors. It is sometimes called bankruptcy law, but the two terms are not always the same.
For example, if someone owes a lot of money to different people and cannot pay it back, they can file for bankruptcy. This means that a court will oversee the process of selling their assets to pay off their debts. There are different types of bankruptcy, such as:
- Chapter 7: Liquidation bankruptcy, where the debtor's assets are sold to pay off creditors.
- Chapter 11: Rehabilitation bankruptcy, where the debtor keeps their assets and makes payments to creditors over time.
- Chapter 12: Family farmer bankruptcy, which is a special type of bankruptcy for farmers.
- Chapter 13: Wage earner bankruptcy, which is a type of rehabilitation bankruptcy for people with regular income.
Insolvency law also deals with the rights of creditors and debtors in these situations. For example, if someone owes money to a creditor who is trying to collect it, the debtor may be able to use insolvency law to protect themselves from harassment or unfair treatment.
Overall, insolvency law is designed to help people who are struggling with debt to get a fresh start and move on with their lives.