Bankruptcy Law - A Basic Discourse
The Bankruptcy law is a federal statutory law contained in title
11 of the United States codes. Congress passed the Bankruptcy
Code under its Constitutional grant of the authority to
establish a uniform law on the subject of the bankruptcy through
out the United States. States may not regulate bankruptcy though
they may pass the laws that govern other aspects of the
debtor-creditor relationship. A number of the sections of the
Title 11 incorporate the debtor - creditor law of the individual.
Bankruptcy allows a debtor, who is unable to pay his creditors
to resolve his debts through the division of his assets among
his creditors. The debtor is forced to resolve his debts through
the division of his assets to his creditors.
This supervised division also allows the interests of all
creditors to be treated with some measure of equality. Certain
bankruptcy proceedings allow a debtor to stay in business and
use revenue generated to resolve his or her debts. An extra
purpose of bankruptcy law is to allow certain debtors to free
themselves of the financial obligations they have accumulated,
after their assets are distributed, even if their debts have not
been paid in full.
A United States Bankruptcy court supervised bankruptcy
proceedings and is where bankruptcy is litigated. These are
parts of District Courts of the United States. The congress has
established The United States Trustees to handle many of the
supervisory and administrative duties of the bankruptcy
proceedings. Proceedings in bankruptcy courts are governed by
the Bankruptcy Rules which were promulgated by the Supreme Court
under the authority of Congress.
There are two types of Bankruptcy proceedings.
* Chapter 7 is called liquidation. Informally called "straight
bankruptcy," the most common type of bankruptcy proceedings
liquidation involves the appointment of a trustee who collects
the non-exempts property of the debtor, sells it and distributes
the proceeds to the creditors. The debtor turns over all
non-exempt property or assets to the bankruptcy trustee who then
converts it to cash for distribution among the creditors. At the
end of the proceeding the debtor receives a discharge of
indebtedness or the discharge notice, for all dischargeable
debts, releasing him or her from personal liability for those
debts.
* Chapters 11, 12, 13, involve the rehabilitation of the debtor
to allow him or her to use future earnings to pay off the
creditors. Chapter 11 is reorganization. In this chapter the
debtors are allowed to continue its operations while paying
their debts. In chapter 13, the lawyer and the debtor propose a
plan to repay debts over a period of time up to three years.
A trustee is appointed to supervise the assets of the debtor.
The debtor can either enter the bankruptcy proceedings or it can
be initiated by the creditors. The creditors may not seek to
collect their debts outside the proceedings at the most part,
after the bankruptcy proceedings is filed. The property declared
as a part of the state can not be transferred by the debtor to
his property. Furthermore, certain pre-proceeding transfers of
property, secured interests, and liens may be delayed or
invalidated. Various provisions of the Bankruptcy Code also
establish the priority of creditors' interests.
The latest bankruptcy law is in effect. The landscape has
changed for those who are considering bankruptcy. Before the
debtor can file a bankruptcy case, they should undergo credit
counselling, budgeting and debt managements before the debt is
wiped out. Chapter 7 is not allowed to be used by a filer with a
higher income, but instead they will be paying the sum of their
debt under chapter 13. It will be tougher to find an attorney to
represent you in a bankruptcy case because the law imposes new
requirements to the lawyers.