What is bankruptcy?
Q: What is bankruptcy?
A: Bankruptcy is a legal process that occurs when a person or an organization is insolvent and cannot pay all of its debts.
Q: Who can ask the court to appoint a trustee in bankruptcy?
A: The creditors of a person who cannot pay their debts can ask the court to appoint a trustee in bankruptcy.
Q: What does a trustee in bankruptcy do?
A: A trustee in bankruptcy, who is a professional accountant appointed by the court, takes control of a bankrupt person's assets, sells off all of the other assets, and uses the money to pay as much of that person's debts as possible.
Q: Are all assets protected by law in bankruptcy?
A: No, only some assets are protected by law in bankruptcy.
Q: What happens to an individual after the bankruptcy process is complete?
A: After the bankruptcy process is complete, the individual is discharged from bankruptcy and is free from any further liability to pay those claims. However, their ability to borrow money again will be limited because their credit rating will be damaged.
Q: What happens when an organization cannot pay its debts?
A: When an organization cannot pay its debts, the creditors may ask the court to appoint a liquidator.
Q: How is the job of a liquidator different from that of a trustee in bankruptcy?
A: The job of a liquidator is very similar to that of a trustee in bankruptcy except that there are no assets which are protected, so the liquidator can sell everything. Once all of the assets of the organization have been sold, the organization is dissolved and no longer exists.
