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
nonexempt property of the debtor, sells it and distributes the
proceeds to the creditors. The debtor turns over all nonexempt
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 the 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.
