The legal information institute at Cornell Law school defines bankruptcy law as the reduction or elimination of certain debts, that can provide a timeline for the repayment of non-dischargeable debts over time. It also permits individuals and organizations to repay secured debt, typically debt with real estate or personal property like vehicles pledged as collateral often on terms more favorable to the debtor. Bankruptcy proceedings are supervised by and litigated in the Bankruptcy Court, which is part of the Federal District Court system. Congress established the U.S. Trustee Program to oversee the administration of bankruptcy proceedings and authorized the U.S. Supreme Court to propagate the Federal Rules of Bankruptcy Procedure. The Federal bankruptcy law is contained in Title 11 of the U.S. Code. Congress passed the Bankruptcy Code under its constitutional grant of authority to establish uniform laws when it came to dealing with bankruptcy throughout the United States. States may not regulate bankruptcy, but they may pass laws that govern other aspects of the relationship between the debtor and creditor.
Bankruptcy law comprises of five different chapter types as evident in chapters 7, 9, 11, 12, and 13 each of these dealing with different bankruptcy issues. All bankruptcy must be filed accordingly under their described chapters, as a bankruptcy lawyer Arlington TX relies on can explain. Chapter 7 deals with the discharge of unsecured debt, such as debt from credit cards and personal loans. Secured debt is typically unaltered, meaning that the collateral securing the debt remains in the debtor’s possession if timely payments are made. It is always available to corporations and individuals with primarily business debt. Otherwise, individuals cannot file a Chapter 7 petition unless they meet certain income requirements. Next is chapter 9 which deals with governing the reorganization of municipalities and related local entities, such as county-owned hospitals and school districts. Individuals and corporations cannot file for bankruptcy under Chapter 9. Another chapter is chapter 11 which is the most comprehensive chapter of the Bankruptcy Code; it provides countless options to reorganize debt. Although individuals may file for Chapter 11 relief, the relatively high filing fees and administrative costs lead most individuals to favor Chapter 7 or Chapter 13 bankruptcy proceedings.
Chapter 12 type of filling provides for the restructuring of debt for family farmers. Only family farmers are eligible and, though not analogous, it shares many characteristics with a Chapter 13 proceeding. And finally, the chapter 13 filing permits the discharge of some debt, as well as the repayment of other debt over a period of three to five years. It may also permit a reduction in principal owed on secured debt, or the elimination of these debts altogether. It can also be used to structure a repayment plan for debt that cannot be discharged in bankruptcy. Only individuals may file under this chapter, and there are some limited income and debt qualifications. Typically, recent tax debt as well as child support, criminal restitution, and student loans will not be discharged in bankruptcy unless they are repaid in full by the debtor during the proceeding. Individuals are permitted to keep certain assets without regard to the type of bankruptcy sought. For example, Individual Retirement Accounts (IRAs) are protected and thus cannot be involuntarily used to repay creditors in a bankruptcy. Varying levels of home equity are also often protected, as are personal vehicles in varying amounts.
Thanks to our friends and contributors from Brandy Austin Law Firm PLLC for their insight into bankruptcy law.