As I was doing research for this blog post, I came across a treasure trove of information on the subject of bankruptcy. Surprisingly, much of the information is supplied by the federal government itself. On the official website for the federal courts, USCourts.gov, the government provides you with all of the necessary information on the basics of bankruptcy. Although it is remains the advice of this firm to always have experienced bankruptcy counsel if you decide to file, this website will provide you with the background information on what a bankruptcy is, which version may be best for you, and the appropriate procedure to successfully accomplish the task.
Article I, Section 8 of the U.S. Constitution gives Congress the power to make and enact bankruptcy laws. Using that power, Congress in 1978 passed the Bankruptcy Code. It can be found in Title 11 of the United States Code. The Bankruptcy Code provides all of the laws that govern bankruptcy. Along with the substantive law, there is a set of procedural standards that must be followed, called the Federal Rules of Bankruptcy Procedure, those rules along with any local rules of the district where the bankruptcy court is located, provide the procedure that govern all bankruptcy proceedings.
Although a bankruptcy is presided over by a federal bankruptcy judge, most of the action in a bankruptcy action takes place outside of the courtroom. The process is typically overseen by a bankruptcy trustee who is appointed by the court. When the case goes before a judge, it is the judge who decides whether a debtor is eligible to file for bankruptcy, whether a debtor’s debts can be discharged in bankruptcy, as well as other matters.
The Code provides for six different types of bankruptcies. Chapter 7 is called “Liquidation.” During this process, the trustee takes possession and control of the debtor’s assets and property. The trustee sells the assets and then pays off the creditors. Some of the property owned by the debtor is exempt from the bankruptcy. In addition, the status of the creditors will determine how they are paid once the debtor’s estate has been reduced to cash.
Chapter 9 is the chapter that allows municipalities, like cities and towns, to reorganize, equivalent to a governmental Chapter 11. Chapter 11 allows businesses and some individuals to stay in business and pay creditors without having to give up the business. A court-approved reorganization plan guarantees that creditors will receive what is owed to them, but the business remains in operation. Several major US companies have filed for Chapter 11, including General Motors.
Chapters 12 and 13 allow debt relief for workers with regular income. Chapter 12 is reserved for farmers and fisherman, whereas chapter 13 is for all other means of employment. These chapters allow an individual to pay off his or her debts over an extended period of time. It allows the debtor to keep valuable assets and make a plan to pay off creditors without having to lose his or her entire estate to the bankruptcy. Finally, Chapter 15 provides the procedure for dealing with property that the debtor owns but that is located in a foreign country. These are referred to as “cross-border cases.”
Though this information can help make the process more transparent it is always advisable that you consult a bankruptcy attorney before moving forward with a filing. If you find yourself needing the services of an attorney, please call us at the Law Office of David M. Goldman. As professionals who are experienced in the bankruptcy arena, our attorneys will provide you with the best advice regarding your financial options.