Bankruptcy is a legally declared state in which a person or business becomes insolvent, meaning they are not in a position to pay their creditors. There are several causes of insolvency, among them are uninsured chronic diseases which requires the sick to be hospitalized for long periods of times. Bills may escalate to a point where they cannot be paid forcing the debtor to file a petition voluntarily. In the involuntary case, creditors may decide to file a petition in court against the alleged debtor.

After the petition is filed, the court appoints a trustee to oversee the proceedings. This court official is also known as a bankruptcy administrator. They have the responsibility to oversee that the debtor is not harassed by the creditors. It is also a way of relieving the him the responsibility towards the property. Once this property has been handed over to the court, it ceases to have the name assets and becomes estate.

There are three rules mainly used by the courts in the process of insolvency solution. The first rule is that the property should be proportional to the agent claim. This insolvency solution rule is applicable if the petition has been filed under chapter seven of bankruptcy. It cannot be used under chapter nine since the municipal has no property on its own.

The second rule is the equal award division of the estate which requires for the estate to be divided equally in such a manner that none of the creditors get more than their claim on the property. The last and final rule in insolvency solution is the equal losses rule that states that the estate should be divided in such a manner that none of the creditors get a loss more than their claim.   

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