Under Article I, Section 8, of the US Constitution Congress authorized the “Bankruptcy Code” in 1978. The Bankruptcy Code, which is coded as title 11 of the US Code, has been modified time after time since its enactment. It is the federal law that regulate all the bankruptcy cases.
The bankruptcy process is regulated by the “Bankruptcy Rules” and the local rules of every bankruptcy court. These rules consist of a set of official forms which are to be used in bankruptcy cases. The Bankruptcy Code and Rules ascribe the legal plan and steps for dealing with the debt issues of individuals and enterprises.
The court official for the confederate bankruptcy cases is the bankruptcy judge of United States, a judicial officer of the district court. Any decision related to the bankruptcy case is given by the bankruptcy judge like eligibility, discharge of debts should be allowed or not etc. Under the cases of chapters 7, 12, or 13, and sometimes cases under chapter 11, this regulatory process is carried out by a fiduciary who is appointed to lead the case.
There is very little involvement of a debtor and a bankruptcy judge. Under the case of chapter 7,a debtor show up in the court and see the bankruptcy judge only when there is an objection raised. A debtor under chapter 13 case may only have to present himself in the court at the time of plan confirmation hearing. Meeting of creditors is usually, the only legal process at which a debtor must present himself. This meeting generally takes place at the office of US fiduciary. Informally it is known as a “341 meeting” as section 341 of the Bankruptcy Code demand’s that a debtor must appear in this meeting so that he can be questioned about the debts and property by the creditors.
The main aim of the bankruptcy laws passed by the government is to free the debtors from the burden of debt and give them a fresh start.
Bankruptcy and loans – The dreaded relationship
Getting loans is no big deal in the current times. If you have an income which is well above the average and you have a fair credit score getting a loan can take just a day or two. With the numerous lending companies and the bad credit loans lenders available with multiple loans products you can easily find the one you are searching for. The banks and the finance companies operating in the space leave little for you to think and are ready to offer you loans at any cost even if it takes to lending you knowing that you have a bad credit history.
In such a situation one can hardly have the guts to stop themselves from taking loans looking at the kind of luxuries which are on offer with these loans and the way they will change their life from normal to the desired state. However, those who give in to these demands can be seen fighting to clear their debts all throughout the life for the reason that they their income will never let them do the same.
This goal is achieved through the bankruptcy discharge, which set free the debtors from personal liability of debts and forbid the creditors from taking any action against the collection of debts. This publication describes the timing, scope, objections and revocation of the discharge. It also explains what steps a debtor can take if a creditor bid to collect an exempt debt after the bankruptcy case is winded up.
The Bankruptcy Code provides with six types of bankruptcy cases. These cases are named as chapters that give the details regarding them.
Chapter 7-Liquidation-It is basically legal procedure supervised by the court in which a fiduciary takes over the assets of the debtor’s property, convert them to cash and repay the creditors, subject to the rights of the debtor regarding certain exempt assets and the rights of the creditors. In most cases under Chapter 7, as there is generally little or no non-exempt assets, the actual liquidation of the assets might not takes place. These cases are often known as “no-asset cases.” If the case is particularly an asset case and the creditor has submitted the evidence of claim with the court then only a creditor will get a distribution from the debtor’s estate.
Chapter 9 Debts Adjustment of a Municipality- This chapter provides for reorganization, similar to reorganization under chapter 11. But under Chapter 9 only a “municipality” may file for bankruptcy, which includes cities, towns, villages, countries, municipal utilities etc.
Chapter 11 Reorganization-This chapter is generally used by commercial businesses that wish to continue their business and pay off the debts through a plan of reorganization approved by the court. Under the plan of reorganization, the debtor can decrease the burden of its debts by paying off a part of its liabilities and discharging others. Under reorganization the debtor can also end the exhausting contracts, recover assets, and make changes in its activities so as to regain profitability.
Chapter 12 Debts Adjustment of a Family Farmer or Fisherman having Regular Income- This chapter provides aid to family farmers and fishermen in regard of debts. The procedure under chapter 12 is much like the process under chapter 13 and it also has a fiduciary whose duties are almost same as of Chapter 13 trustee. Under Chapter 12 the debtor presents a plan to pay off the debts over a certain time period which is not more than three years unless there is an approval from the court for a long period but cannot exceed five years. While the plan is being executed, it allows a family farmer or fisherman to continue the operation of their business.
Chapter 13 Debts Adjustment of an Individual With Regular Income- is provided to individuals with regular income. Chapter 13 entitles a debtor to keep an irreplaceable property, such as a house, and as it provides the debtor to present a “plan” to pay off the creditors over a period of time usually three to five years. The courts either accept or deny the debtor’s reimbursement plan resting on whether it complies with the requirements of Bankruptcy Code or not. Different from chapter 7, the debtor does not undergo an instant discharge of debts. The debtor must accomplish the repayments involved under the plan before the bankruptcy discharge is sustained. Under Chapter 13 the discharge is also considerably wider than chapter
Chapter 15 Ancillary and Other Cross-Border Cases-It provides with proceduresfor dealing with cases of cross-border bankruptcy. This publication explores the suitability of Chapter 15 where a debtor or its estate is constrained by the laws of US and one or more other countries.
The bankruptcy procedure is complicated and is relied on legal theories like the “discharge,” “exemptions,” “assume.” etc. Thus, the final chapter of the bankruptcy publication is a glossary of all Bankruptcy Terms which explains almost every legal concept and procedure that are applicable in cases submitted under the Bankruptcy Code.