Bankruptcy allows debtors burdened by financial obligations to receive a fresh start. All creditors of the debtor should receive notice of the bankruptcy and information from the court on how to file a claim. Once a claim is filed, the debtor will have the opportunity to oppose the validity of the claim. At the conclusion of the case, the court will usually discharge all of the debtor’s obligations that are eligible for discharge.
Banks can spur a housing recovery by providing underwater borrowers relief through principal reduction.