Bankruptcy Law Explained

Legal Disclaimer

This is a detailed treatment of bankruptcy law and is intended for these who have chosen to prepare their bankruptcy the hard way, that is, by themselves using forms, kits or software. It is not intended as legal advice. If you need legal advice, consult an attorney.

If you have chosen to have us prepare your bankruptcy, you do not need to bother reading any of this since we will be the ones preparing it all for you.

This material sounds complicated because it is a formal or pseudo-academic treatment of the subject. Be rest assured that the other bankruptcy information that we provide to our paid customers is written in simple easy to understand language.

Again, this in-depth treatment of bankruptcy law is not intended for you if you have chosen to have us prepare your documents for you. [Some of the material presented here are excerpted from sources in the public domain. In you are an attorney or if you operate a web site, do not copy this copyrighted material. Instead, link your web site to this page so that your visitors will benefit from it.]

Index:

Bankruptcy Law Summary
Chapter 7 bankruptcy laws
Chapter 13 bankruptcy laws
Property and Exemptions
Structure of bankruptcy laws
Case administration
Types of bankruptcy
How to file bankruptcy
 

Introduction

Pretty much any entity, real or corporate, can file bankruptcy however the term personal bankruptcy characterizes Chapter 7 and Chapter 13 bankruptcies where the filer is a natural person or a married couple. While the whole body of bankruptcy law is quite large and complex, filing a personal bankruptcy can be a straight forward process if it is approached form a practical common sense perspective. This means that personal bankruptcy laws make sense and can be framed in easy to understand language. This resource explains personal bankruptcy laws in layman's terms and offers practical information on the filing process.

The Structure of Bankruptcy Laws

Bankruptcy laws are part of the Federal body of laws collectively referred to as the United States Code and are contained in Title 11 of the code. Title 11 is broken down into chapters with each chapter dealing with a specific area of bankruptcy law. Most of the Chapters are general and define the overall operation of the system and others define specific types of bankruptcies. Chapters 7, 11 and 13 define types of bankruptcies and are therefore more familiar to the public. This section explores the structure of the bankruptcy code and their applicability to personal bankruptcies for lay people.

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Types of Bankruptcy

There are five types of bankruptcy, Chapter 7, 9, 11, 12 and 13. Chapter 7, also called liquidation, is the most common type of bankruptcy that individuals file. It is extremely popular because it provides for the absolute and complete elimination of most types of debt, thereby giving the debtor a true fresh start. The goal of a Chapter 7 bankruptcy is to obtain a court order discharging one's debts. Chapter 13 is the second most popular type of bankruptcy and it involves paying back your creditors under a court approved repayment plan. Chapter 11 is specially suited for corporations seeking to reorganize their debts while continuing to operate. Chapter 12 is for family farmers and Chapter 9 is for cities and governmental bodies seeking to reorganize their debts. Chances are that you will be filing a Chapter 7 or Chapter 13 bankruptcy. What does it take to qualify to file Chapter 7 or 13? If you run a small corporation can you file Chapter 7? These questions are answered here when you click for details.

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Case Administration

In most cases, bankruptcy is more an administrative process than a judicial process. Unlike other court cases, filing a bankruptcy does not create a lawsuit and there is no plaintiff and no defendant. The role of the court is to supervise the process and to issue orders where necessary. The executive part of the government is represented in the bankruptcy process by the Department of Justice which appoints bankruptcy trustees to provide administration. Bankruptcy trustees are given broad powers to administer bankruptcy cases and they serve the roles of custodian, attorneys for the United States and process overseers.

The day to day functions of the trustee and the court depends on the type of bankruptcy that you file. For example, in Chapter 7 cases, the debtor never sees the judge or appears in a court room. His or her only contact with the government is usually one short meeting with the trustee that could last about one minute. In contrast, in a Chapter 11 case, the debtor is in continually contact with the court and the trustee and has to file many case reports. Would you like to know how your case will be administered? Click the details link for more information.

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Chapter 7 Bankruptcy Laws

As mentioned above, Chapter 7 of the bankruptcy code defines a type of bankruptcy filing called liquidation. You file under Chapter 7 if your debts are largely unsecured or if you want to wipe out most of your debts and never repay them again. If your debts are mostly loans or credit cards and judgments, you would most likely want to file Chapter 7. Imagine that for six months or more you are suffering terribly under the heavy burden of debt and all of a sudden, all that load gets lifted off you and you are a free person. One person likened it to being declared not guilty after a long trial without bail. That is what debtors report experiencing when they file Chapter 7 bankruptcy.
Chapter 7 bankruptcy laws are easy to understand and they deal with the automatic stay, control of the bankruptcy estate, property laws, amendments and the discharge of debts. For detailed treatment of Chapter 7 bankruptcy laws, click the details link.

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Chapter 13 Bankruptcy Laws

There are certain debt situations where a Chapter 7 bankruptcy is not in your best interest. In those situations, you want some breathing room to catch up with your payments. Chapter 13 is suited for those situations where you are best off paying your debts but you need more time than your creditors will allow. Most people who file under Chapter 13 do so because they have fallen behind on their mortgage payments and are facing the possibility of foreclosure. In such situations, bankruptcy law allows debtors up to three years to pay off the arrearage while maintaining their regular payments. Let us say that you were unemployed for six months and during that time you fell behind on your house payments and the mortgage company has demanded that you pay the $5,000 in back payment within 20 days or else they will foreclose. Under a Chapter 13 bankruptcy, the law allows you 36 months to pay off the $5,000 arrearage while you keep up the regular monthly payments. Obviously, you need to show evidence of sufficient income to pay both the regular payments and the new plan payments. There is more to Chapter 13 bankruptcy laws than this and for a more comprehensive treatment, click the details link.

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Property Laws

Obviously, not everyone qualifies to file bankruptcy and if you qualify, there are limits on what assets you can keep and still discharge your debt. Imagine for a moment that you are a small-time contractor and that you have just completed a remodeling job for a home owner. You were just informed that the homeowner has filed bankruptcy and that you were not going to get any money for your work. You would certainly consider it unfair if the court allowed the homeowner to keep $120,000 in his bank account and a $58,000 Mercedes that was paid for while wiping out the $1,700 that you were owed. This fictional scenario obviates the need for laws governing what amounts of property a person can keep after filing bankruptcy. Any amounts above the limits should be converted to cash and paid to the creditors. That is what exemption laws are about.
Bankruptcy laws specify limits for most categories of assets that you can keep after filing bankruptcy and it is the job of the trustee to liquidate any amounts above those limits for the benefit of the creditors. Would you like to know what those limits are for your case? Click on the details link for more information.

When you hire us for your bankruptcy, we provide you access to even more information on this topic including how you can keep assets that you did not think was possible.

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