Your A-Z Guide to Bankruptcy
Bankruptcy can assist people who are no longer able to afford to pay their debts. They are then able to get a new start by liquidating their assets and consolidate their debts or create a repayment plan. Bankruptcy laws are also able to protect any business that is financially troubled. Below we will explain the bankruptcy law and its processes.
What is bankruptcy?
A person filing bankruptcy will be able to discard their debts or make a plan to repay any outstanding debts. These cases usually start with the borrower filing a petition with the bankruptcy court. This appeal can be processed by an individual, spouses filing jointly or by a corporation.
All bankruptcy cases are resolved by federal courts, as the U.S. Bankruptcy codes outlines. There are various types of bankruptcies, and they are commonly referred to by their chapter in the U.S. Bankruptcy code.
Bankruptcy: What the Law Says
Bankruptcy law can reduce or eliminate certain debts, provide a timeline for the repayment of non-dischargeable debts over a period. With this legislation, organizations, and individuals to repay secured debts, which are usually debts where vehicles or real estate were offered as collateral, with more affordable terms.
Bankruptcy law is part of the federal statute law, and it was passed by Congress as the Bankruptcy Code. States are not able to regulate bankruptcy, but they can pass legislation that rule other aspects of the borrower-lender relationship.
All bankruptcy accounts are overviewed and litigated in the United States Bankruptcy Courts, which are part of the District Courts of the United States. All bankruptcy court proceedings are ruled by the Bankruptcy Rules which, under the authority of Congress, are broadcast by the Supreme Court.
There are five varieties of bankruptcy. They are the following:
• Chapter 7: This chapter is available to individuals whose debts are mainly business related and corporations. This chapter is used to cancel unsecured debts, such as personal loans or credit card debt. Any secured debt will generally remain unaltered, so the borrower retains the collateral as long as payments are being made.
• Chapter 9: This chapter cannot be used by corporations or individuals filing bankruptcy, as it is reserved for local entities and municipalities, such as school districts.
• Chapter 11: The most complete chapter of the Bankruptcy Code, it includes a vast array of options in regards to reorganizing debt. These options include some debt repayment, the cancellation of other debts and the restructuring of the remaining debt. It is possible for individuals to file for bankruptcy using Chapter 11, but it has high administrative costs and filing fees, so most people prefer filing using Chapter 7 or Chapter 13.
• Chapter 12: This chapter is available for family farmers looking to restructure their debt, and therefore only family farmers are eligible. Many of its characteristics are shared with Chapter 13.