BANKRUPTCY PLAN Meaning and
Definition
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A bankruptcy plan is a legally binding document that outlines how a bankrupt individual or organization will restructure their financial affairs and repay their debts. It is an essential part of the bankruptcy process and is designed to provide a framework for the debtor's financial recovery while ensuring fair treatment of creditors.
In the context of personal bankruptcy, a bankruptcy plan is typically filed under Chapter 13 of the United States Bankruptcy Code. It details the debtor's proposed payment schedule, outlining how debts will be repaid over a period of three to five years. The plan must be approved by the bankruptcy court after considering the debtor's income, expenses, and other financial factors.
For businesses, a bankruptcy plan is typically submitted under Chapter 11 bankruptcy, allowing the company to continue operating while reorganizing its finances. The plan aims to reduce debt, renegotiate contracts, and restructure the business to regain profitability. It must be accepted by a majority of creditors before it can be confirmed by the court.
In both cases, the bankruptcy plan serves as a roadmap for the debtor's financial recovery, providing a clear path towards debt repayment and a fresh start. It allows the debtor to regain control of their financial affairs and reestablish their creditworthiness, while ensuring that creditors are treated fairly and have a chance to recover their outstanding debts.
Common Misspellings for BANKRUPTCY PLAN
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Etymology of BANKRUPTCY PLAN
The word "bankruptcy" originates from the Italian word "banca rotta", which literally means "broken bench". In medieval Italy, moneylenders would conduct their business on a bench in the marketplace. If a moneylender was unable to continue their business due to insolvency or inability to pay debts, their bench would be broken to signify their financial failure. This eventually led to the term "banca rotta" being used to describe a person or business that could not pay their debts.
The term "plan", in this context, refers to a detailed proposal or strategy for dealing with a specific situation. In the case of bankruptcy, a bankruptcy plan is a legally binding document that outlines how a debtor intends to repay their creditors or reorganize their financial affairs.
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