All That You Must Know About Bankruptcy Basics

  • All That You Must Know About Bankruptcy Basics

All That You Must Know About Bankruptcy Basics

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The Bankruptcy Code, enacted in 1978 and codified as Title 11 of the United States Code, is the uniform federal law that is empowered to govern all bankruptcy cases. This code has been amended several times. The Bankruptcy Rules govern all the procedures of the Bankruptcy process and are the same for all.

In each judicial district of the country, there is a separate bankruptcy court. A state consists of one or more districts. And each bankruptcy court has its own clerk’s office.

The United States Bankruptcy Judge is the official decision-making power in the court. However, the bankruptcy process is mostly administrative, and is conducted away from the courthouse, looked upon by a trustee, who is appointed for the same.

A debtor generally does not get to meet the bankruptcy judge. The meeting where the debtor has to be present is the 341 meeting, which is taken care of by the US trustee.

The main aim of bankruptcy is to give debtors a financial fresh start, away from their debts. This goal is achieved by the bankruptcy discharge, which helps the debtors from personal liability and does not allow creditors to take any action against those debtors that allows them to collect the debts.

  • Chapter 7Chapter 7 is mainly used for liquidation where a Trustee takes over the Assets of the debtors, sells them to get cash, and distributes them to the creditors. However, the debtor can exempt some property if they want, making them non-sellable. A creditor with an unsecured claim gets money only in ‘asset cases’, that too after filing a proof of claim. A debtor is normally discharged within a few months of filing the petition. The means test is the medium through which it is decided if a person qualifies to file for bankruptcy.
  • Chapter 9It is mainly for Reorganisation. Only a ‘municipality’ can file under chapter 9.
  • Chapter 11It is used by commercial enterprises who want to keep operating their business and also repay the creditors through a court-approved plan of reorganization. Under this chapter, A Debtor goes through consolidation and comes up with a reduced load and a reorganized business.
  • Chapter 12It is entitled to adjust the debts of a family farmer or fisherman who have a regular annual income. The repayment plan is similar to that of chapter 13, where the debtor proposes to repay the debts over a while. A family farmer or a fisherman can continue to operate their business while the file for chapter 12 goes on.
  • Chapter 13An individual with a regular income proposes to repair the creditors over a time of 3 to 5 years. This is a more preferable way as the debtor gets to keep all valuable assets. At the hearing, the court either approves or disapproves of the debtors’ repayment plan. The debtor is protected from all lawsuits, garnishments, and other creditors taking action against them while the chapter 13 bankruptcy case goes on.
  • Chapter 15To deal with cases of cross-border insolvency Chapter 15 is there. This case arises where the debtor or its property is subject to the laws of one or more foreign countries.

Apart from these, Service member’s Civil Relief Act protects the members of the military against the entry of default judgments.

The bankruptcy process is complex and relies mostly on a lot of legal concepts. Getting in touch with an attorney who knows about bankruptcy is always helpful. You can also contact Recovery Law Group from Los Angeles & Dallas, TX for the same. Contact – (888-297-6203).