A legal process that involves a business or a person’s inability to pay off the outstanding loan is termed as bankruptcy. The petition is filed by the creditor in the court under the bankruptcy code and court after the verification issues an order called bankruptcy court option agreement which protects the debtor from the further legal actions from the creditor and provides creditor with a solution to compensate for his potential money borrowed.
Before declaring a person a bankrupt, the court verifies the debtor whether he wants to be declared a bankrupt or not? If the answer is no then comes in account the bankruptcy court option agreement which includes rehabilitation and reorganization of the loan in a best suitable option for both the parties. According to this agreement the borrower is allowed to retain his nonexempt financial matters and assets without going through the liquidation process while the borrower in return agrees to pay the loan in accordance with the reorganizational plan provided by the bankruptcy court.
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