Bankruptcy in the USA: advantages and disadvantages of this procedure

Rudy Giuliani's decision to file for bankruptcy may give the former New York mayor some time to sort out his debts, including the $148 million settlement he must pay to two former Georgia election officials for spreading lies that they tried to rig the 2020 election. However, this will not result in the jury's decision being overturned. Why do people file for bankruptcy and how is it beneficial, the publication found out The New York Times.

Photo: IStock

What does filing for personal bankruptcy do?

Personal bankruptcy, like corporate bankruptcy, usually suspends all legal proceedings or attempts by creditors to collect the debt. Given that, it's not too surprising that Giuliani filed for bankruptcy a day after a federal judge ordered him to begin paying damages awarded to former election officials. Filing an application can hurt a person's credit score, making it more difficult to obtain a loan or purchase property in the future.

What are the benefits of filing for bankruptcy?

People file for bankruptcy when their debts exceed their assets and they see no hope of the situation changing anytime soon. Filing for bankruptcy is intended to give a person breathing space to get their affairs in order and usually come up with a plan to pay creditors.

On the subject: What debts you will never forgive in the United States, even if you declare yourself bankrupt

The purpose of bankruptcy is to give the debtor a “fresh start” so that he is not saddled with obligations forever. In 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 personal bankruptcy?

Creditors are people, institutions or businesses to whom a person owes money. When filing for bankruptcy, creditors' claims are usually ranked in order of priority for receiving payments. The so-called secured creditors who potentially top this list are companies or people who have a claim against the debtor related to the property. In a personal bankruptcy, the most common secured creditor is the bank that holds the mortgage on the property.

All other claims in bankruptcy are considered unsecured, but some have “priority” status when it comes to receiving payments. Typically, creditors' priority requirements include taxes. Giuliani indicated in his return that he owes about $1 million in income taxes to the Internal Revenue Service and the state of New York.

Most of an individual's debts will be listed as unsecured claims without priority status.

Giuliani did not list any secured claims. His filing listed a number of unsecured, non-priority debts, including a $148 million payment. He also listed about $3 million in debts to lawyers as non-priority unsecured claims.

What happens to a person's debts during bankruptcy?

Some bankruptcies result in a payment plan under which a person will make payments to certain creditors at a reduced rate. Typically, creditors included in a payment plan receive only a portion of what they are owed.

Some debts can be discharged in bankruptcy, meaning a person is not required to make payments on them. These often include credit card debt, medical debt, and loans not secured by property.

You may be interested in: top New York news, stories of our immigrants and helpful tips about life in the Big Apple - read it all on ForumDaily New York

In some bankruptcies, the mortgage may be discharged, but usually debtors can lose title to their home. The same applies to a car loan. Child support, student loan payments, criminal fines and income taxes generally cannot be forgiven in bankruptcy.

Some civil judgments are partially forgiven. But a judgment based on malice cannot be discharged, and in Giuliani's case, the jury's decision in favor of the former election officials would likely fall into that category.

Lindsey Simon, a professor at Emory University Law School who specializes in bankruptcy, said Giuliani likely won't be able to challenge the jury's decision. But she said filing for bankruptcy could give him time to "come to some sort of agreement."

Read also on ForumDaily:

The seven cheapest cities to live in America

Artificial intelligence has learned to reproduce without human intervention

Ohio City Named Best Place to Retire in the US

Benefit or harm: do films with subtitles help when learning a language?

Creepy accuracy: scientists have created an AI capable of predicting a person’s death

Top 11 Simple Part-Time Jobs That Will Help You Get Rich in 2024

Five inexpensive Christmas gifts at Costco that will suit everyone.

Do you want more important and interesting news about life in the USA and immigration to America? — support us donate! Also subscribe to our page Facebook. Select the “Priority in display” option and read us first. Also, don't forget to subscribe to our РєР ° РЅР ° Р »РІ Telegram  and Instagram- there is a lot of interesting things there. And join thousands of readers ForumDaily New York — there you will find a lot of interesting and positive information about life in the metropolis.