Bankruptcy

Bankruptcy, which appears as a type of personal failure in the financial world, was actually designed with the aim of granting the debtor a chance to start over. In the U.S.A. the bankruptcy process is regulated by the Bankruptcy Code and Bankruptcy Rules. These rules define the proceedings which may lead to the discharging of the debtor from the legal duty of repaying their debts, after having declared all debts and property. These documents also contain the forms necessary to begin the process. A bankruptcy may be voluntary or involuntary, meaning it can be filed by the debtor or the creditor.

Bankruptcy Code

Filing for bankruptcy requires the filing of a petition. These vary depending on your situation. For example, procedures vary for debtors who are individuals, fishermen, farmers (Chapter 12), companies (Chapter 11) or municipalities (Chapter 9).

Individuals filing under Chapter 7 (Liquidation) of the Bankruptcy code have the possibility of becoming fully discharged from their debts, meaning they will no longer be legally responsible for their debt. This occurs only after the maximum amount of debt is paid off, and remains on a person`s credit record for ten years. Generally, this consists of a trustee ‘liquidating’, or selling the debtor’s assets, in order to pay-off the creditors.

Chapter 13 is called ‘Individual Debt Adjustment’ and offers people the chance to file for a financial reorganization which will be monitored by the Bankruptcy Court. This allows the debtor to make a payment plan for his debt, and legally obliges creditors to stop pursuing any other collection plan. The trustee which oversees the matter has the power to reverse certain transactions by debtors, if they have been concluded to be against their legal payment plan. This chapter allows individuals to freeze, or save assets from liquidation. This is very advantageous for obvious reasons, such as providing some peace-of-mind while dealing with an already stressful collection situation. Exempting property is also possible for individuals, and there are varying lists of assets which are eligible for becoming exempt. If seeking to do this, the individual must consult federal and state lists of assets eligible for exemption, and chose one of them to follow. Chapter 15 of the code is devoted to proceedings on an international scale. In these cases however, bankruptcy is referred to as insolvency, which is the proper term for corporations.

Features

All bankruptcies are regulated by the Bankruptcy Code, and if necessary, are handled by the Bankruptcy Court. They may be filed by an individual, corporate entity or may be filed against you. In court, the debtor and jury is provided with a trustee and advising committee representing the same category of debtor. They provide input which is helpful during, and while preparing for the court process. The debtor usually has limited contact with a bankruptcy judge, often limiting formal proceedings to the meeting of creditors.

Certain organizations, like public services, such as railroads, cannot claim bankruptcy, as they are corporate entities of the federal government. Before filing for bankruptcy, it is possible to avoid the collection of outstanding debts to U.S. creditors, by taking avoidance actions. These can help lessen the economic impact of the entire matter, and slow the pursuit of a debtor by creditors.

A full discharge from all debt is only available to individuals. Both parties in the bankruptcy are obliged to follow an executor contract; a pre-decided payment plan. However, there are certain debts from which persons are unable to discharge themselves, such as the payment of child support.

Other actions are also available to people filing for bankruptcy, such as preference actions. These allow the debtor to recover certain payments made to creditors, within the time-frame of 90 days prior to the official filing.

Another possibility is that of property redemption. Under Chapter 7, if an asset or property is declared as for personal use, and is clearly indispensable to you or your family, it is possible to reclaim this property after an executor contract has been fully carried out.

Conclusion

When facing the possibility of filing for bankruptcy in the U.S.A. it is important to first consult the Bankruptcy law. To access the code, please view the information provided on the United States Courts website. The different chapters of the code reflect the types of bankruptcy procedures, which vary depending on whether you are filing for yourself or for a corporation. Proceedings also vary for farmers and fishermen. There are also certain features of the law which should be understood ahead of time, as they may be utilized to protect certain types of assets during the bankruptcy process. These include avoidance actions and property redemption.