Bankruptcy Law - A Basic Discourse
By Dean Shainin

The law is a federal statutory law contained in title 11 of the United States codes. Congress passed the Code under its Constitutional grant of the authority to establish a uniform law on the subject of the through out the United States. States may not regulate though they may pass the laws that govern other aspects of the debtor-creditor relationship. A number of the sections of the Title 11 incorporate the debtor - creditor law of the individual.

Bankruptcy allows a debtor, who is unable to pay his creditors to resolve his debts through the division of his assets among his creditors. The debtor is forced to resolve his debts through the division of his assets to his creditors.

This supervised division also allows the interests of all creditors to be treated with some measure of equality. Certain proceedings allow a debtor to stay in business and use revenue generated to resolve his or her debts. An extra purpose of law is to allow certain debtors to free themselves of the financial obligations they have accumulated, after their assets are distributed, even if their debts have not been paid in full.

A United States court supervised proceedings and is where is litigated. These are parts of District Courts of the United States. The congress has established The United States Trustees to handle many of the supervisory and administrative duties of the proceedings. Proceedings in courts are governed by the Rules which were promulgated by the Supreme Court under the authority of Congress.

There are two types of proceedings.

* Chapter 7 is called liquidation. Informally called "straight bankruptcy," the most common type of proceedings liquidation involves the appointment of a trustee who collects the non-exempts property of the debtor, sells it and distributes the proceeds to the creditors. The debtor turns over all non-exempt property or assets to the trustee who then converts it to cash for distribution among the creditors. At the end of the proceeding the debtor receives a discharge of indebtedness or the discharge notice, for all dischargeable debts, releasing him or her from personal liability for those debts.

* Chapters 11, 12, 13, involve the rehabilitation of the debtor to allow him or her to use future earnings to pay off the creditors. Chapter 11 is reorganization. In this chapter the debtors are allowed to continue its operations while paying their debts. In chapter 13, the lawyer and the debtor propose a plan to repay debts over a period of time up to three years.

A trustee is appointed to supervise the assets of the debtor. The debtor can either enter the proceedings or it can be initiated by the creditors. The creditors may not seek to collect their debts outside the proceedings at the most part, after the proceedings is filed. The property declared as a part of the state can not be transferred by the debtor to his property. Furthermore, certain pre-proceeding transfers of property, secured interests, and liens may be delayed or invalidated. Various provisions of the Code also establish the priority of creditors' interests.

The latest law is in effect. The landscape has changed for those who are considering bankruptcy. Before the debtor can file a case, they should undergo credit counselling, budgeting and debt managements before the debt is wiped out. Chapter 7 is not allowed to



be used by a filer with a higher income, but instead they will be paying the sum of their debt under chapter 13. It will be tougher to find an attorney to represent you in a case because the law imposes new requirements to the lawyers.

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