How Does the Bankruptcy Law Help Debtors? A History of Debt & the Legal System (2002)

• published: 15 Aug 2015
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Bankruptcy in the United States is a matter placed under federal jurisdiction by the United States Constitution (in Article 1, Section 8, Clause 4), which allows Congress to enact "uniform laws on the subject of bankruptcies throughout the United States". The Congress has enacted statutes governing bankruptcy, primarily in the form of the Bankruptcy Code, located at Title 11 of the United States Code. Federal law is amplified by state law in some places where Federal law fails to speak or expressly defers to state law. While bankruptcy cases are always filed in United States Bankruptcy Court (an adjunct to the U.S. District Courts), bankruptcy cases, particularly with respect to the validity of claims and exemptions, are often dependent upon State law. One example: two states, Maryland and Virginia, which are adjoining states, have different personal exemption amounts that cannot be seized for payment of debts. This amount is the first $6,000 in property or cash in Maryland, but only the first $5,000 in Virginia. State law therefore plays a major role in many bankruptcy cases, and it is often not possible to generalize bankruptcy law across state lines. Generally, a debtor declares bankruptcy to obtain relief from debt, and this is accomplished either through a discharge of the debt or through a restructuring of the debt. Generally, when a debtor files a voluntary petition, his or her bankruptcy case commences. There are six types of bankruptcy under the Bankruptcy Code, located at Title 11 of the United States Code: Chapter 7: basic liquidation for individuals and businesses; also known as straight bankruptcy; it is the simplest and quickest form of bankruptcy available Chapter 9: municipal bankruptcy; a federal mechanism for the resolution of municipal debts Chapter 11: rehabilitation or reorganisation, used primarily by business debtors, but sometimes by individuals with substantial debts and assets; known as corporate bankruptcy, it is a form of corporate financial reorganisation which typically allows companies to continue to function while they follow debt repayment plans Chapter 12: rehabilitation for family farmers and fishermen; Chapter 13: rehabilitation with a payment plan for individuals with a regular source of income; enables individuals with regular income to develop a plan to repay all or part of their debts; also known as Wage Earner Bankruptcy Chapter 15: ancillary and other international cases; provides a mechanism for dealing with bankruptcy debtors and helps foreign debtors to clear debts. The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter 13. Whether a person qualifies for Chapter 7 or Chapter 13 is in part determined by income. [23]As much as 65% of all U.S. consumer bankruptcy filings are Chapter 7 cases. Corporations and other business forms file under Chapters 7 or 11. Often called "straight bankruptcy" or "simple bankruptcy," it allows consumers to eliminate just about all of their debts over a period of three or four months. Typically, the only bills that survive a Chapter 7 are student loans, child support obligations, some tax bills and criminal fines. Credit cards, pay day loans, personal loans, medical bills, and just about all other bills are discharged. 91% of U.S. individuals filing bankruptcy hire an attorney to file their Chapter 7 petition.[24] The typical cost of an attorney is $1,170.00.[24] Alternatives to filing with an attorney are: filing pro se, meaning without an attorney, which requires an individual to fill out at least sixteen separate forms,[25] hiring a petition preparer (which have a track record of shoddy work and unsuccessful cases),[26] or using online software to generate the petition. https://en.wikipedia.org/wiki/Bankruptcy