What is bankruptcy?
Bankruptcy is imposed by a court order or a debtor when a legal entity is incapable of paying off their exceptional debts. The debtor’s assets are assessed and calculated and will be utilized to repay a portion of the debt.
“Bankruptcy cases almost exclusively fall under federal law, though states may pass laws governing issues that federal law does not address. Special bankruptcy courts nationwide handle only debtor-creditor cases. Generally, any bankruptcy-related claim must be filed with the U.S. Bankruptcy Court.”[1]
“The most common types of bankruptcy proceedings are:
- Bankruptcy Petition – The document filed with the U.S. Bankruptcy Court that initiates a bankruptcy proceeding; usually contains the debtor’s assets, debts, and other liabilities,
- Chapter 7 (Individual Bankruptcy)– A petition filed under Ch. 7 of the U.S. Bankruptcy Code for an individual debtor to liquidate his or her assets and settle or discharge debts,
- Chapter 11 (Business Reorganization) – A petition filed under Ch. 11 of the U.S. Bankruptcy Code for a business to reorganize its liabilities and assets, as well as settle or discharge its debts,
- Chapter 13 (Wage Earner’s Plan) – A petition filed under Ch. 13 of the U.S. Bankruptcy Code where an insolvent debtor may ask the court to grant additional time for the debtor to pay off his or her debts, so long as the debtor is earning a steady income.”[2]
- Other laws include: United States Bankruptcy Code[3] and Federal Rules of Bankruptcy
- [4]
Bankruptcy law provides for the reduction or elimination of certain debts and can provide a timeline for the repayment of no 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.[5]
- Role of lawyer include:
The concept of bankruptcy is very complex and also effortless in some circumstances. The goal of bankruptcy attorneys is to advice clients through the process of bankruptcy whilst retaining rapport to make the best out of a bad situation. Attorneys with additional assistance of paralegal, assess assets and debts and plan the best outcomes which are at a later stage strategized and executed effectively. Bankruptcy lawyers prepare and file all the required necessary paperwork with providing sound legal advise as well as representing clients at court hearings.
[1] https://www.findlaw.com/hirealawyer/choosing-the-right-lawyer/bankruptcy-law.html [2] Ibid. [3] https://uscode.house.gov/browse/prelim@title11&edition=prelim [4] https://www.uscourts.gov/sites/default/files/federal_rules_of_bankruptcy_procedure_-_dec_1_2019_1.pdf [5] https://www.law.cornell.edu/wex/bankruptcy
