Bankruptcy is an expression used to mean insolvency, which is a condition in which a person’s liabilities exceed his or her assets, or in which current cash flow is not sufficient to meet current debts.
As a result of the condition, the debtor may take advantage of protections afforded by the Bankruptcy Code.
Immediately upon filing for bankruptcy, the law imposes an automatic stay that prohibits all collection activities. Everything must stop at once, including foreclosures.
Over time, the stay may be lifted or suspended so that collection activities may resume. The law does allow a breathing spell to allow the debtor and his or her attorney time to analyze their options.
The Bankruptcy Code underwent a dramatic change with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA.) Bankruptcy is now a much less consumer-friendly thing than it used to be, and it places greater demands on bankruptcy lawyers.