Bankruptcy law allows the structuring of a new development repayment plan which allows debtor, who is in financial turmoil due to debt burden, to pay off his debts by division of his assets among the creditors. The division is supervised by the court and hence debtor is protected from unscrupulous creditors. Creditors also are protected since that are treated equally and law takes an active interest to repay their dues. There are bankruptcies that allow debtor to continue with his business and repay his debts with revenue generated. Another chapter of bankruptcy discharges debts incurred by debtor even if his debts have not been repaid completely.
Bankruptcy law is a federal statutory law in the Title 1.1 of the United States Code. It was passed by the Congress, under its authority of Constitutional right that confers upon the congress power to establish laws on bankruptcy throughout the United States. States do not have much power over bankruptcy proceeding but they retain rights to pass local laws with respect to other aspects of debtor-creditor relationship. Moreover the list of exempted property is regulated by state laws.
A bankruptcy proceeding is supervised by the Bankruptcy Courts of the United States. These are an inherent part of District Courts of the US. The Congress established the United States Trustees who handle the supervisory and administrative duties of the bankruptcy proceedings. The Bankruptcy Rules are projected by the Supreme Court under the authority of Congress.
There are two basic types under which bankruptcy can be filed. Chapter 7 involves liquidation and is by far the favorite of debtors mainly due to discharge of debts on completion of process. A trustee is appointed who collects all non exempt property and sells it and divides the proceeds among debtor’s creditors. Bankruptcy can be filed under chapters 11, 12 and 13 and in these cases, the debtor is rehabilitated and allowed to repay his debts through a new repayment plan drafted by the court. In all these cases there is a court appointed trustee who supervises the entire process.
Debtors can file for bankruptcy either voluntarily of on initiation by creditors. On filing of bankruptcy, creditors are not allowed to collect their debts or make any contact with debtor for the purpose. The debtor on his part is not allowed to transfer property or any other assets and even some pre proceeding s transfers can be invalidated.
Major reforms to bankruptcy law to Bankruptcy Prevention and Consumer Protection Act outlines revised guidelines for dismissal, conversions of chapter 7 to chapter 13 or 11 proceedings. The trustees have been given additional responsibility of random and targeted audits, certification of organizations that can provide credit counseling, certification for services of credit education etc.
Call a seasoned bankruptcy lawyer in Savannah if you are considering bankruptcy.