If you need further information or require the assistance of a Bankruptcy lawyer in your area, please contact the Bankruptcy attorney listed in this Bankruptcy Lawyer Directory for Bankruptcy legal assistance.
Bankruptcy Law Overview and Information
Bankruptcy law aims to allow the debtor to make a fresh start, not to be punished for inability to pay debts. The process of bankruptcy provides for the development of a plan that allows a debtor, who is unable to pay his creditors, to resolve his debts through the division of his assets among his creditors. Bankruptcy law allows certain debtors to be discharged of the financial obligations they have accumulated, after their assets are distributed, even if their debts have not been paid in full. Some bankruptcy proceedings allow a debtor to stay in business and use business income to pay his or her debts.
Bankruptcy law is federal statutory law contained in Title 11 of the United States Code. Congress passed the Bankruptcy Code under its Constitutional grant of authority to "establish. . . uniform laws on the subject of Bankruptcy throughout the United States." States are not empowered to regulate bankruptcy, but they may enact laws that govern other aspects of the debtor-creditor relationship. A number of sections of Title 11 incorporate the debtor-creditor law of the individual states. Various provisions of the Bankruptcy Code also establish the priority of creditors' interests.
Bankruptcy proceedings are conducted in the United States Bankruptcy Courts. These courts are a branch of the District Courts of The United States. The United States Trustees were established by Congress to handle many of the supervisory and administrative duties of bankruptcy proceedings. Proceedings in bankruptcy courts are governed by the Bankruptcy Rules which were promulgated by the Supreme Court under the authority of Congress.
A bankruptcy proceeding can either be entered into voluntarily by a debtor or initiated by creditors. After a bankruptcy proceeding is filed, creditors generally are prevented from pursuing debt collection outside of the proceeding. The debtor is not allowed to transfer property that has been declared part of the estate subject to proceedings. Furthermore, scrutiny may be made of certain pre-proceeding transfers of property, secured interests, and liens, which may be delayed or invalidated. Hiding assets, fraudulent conveyances of assets, and preferential transfers are subject to scrutiny and potentially may result in criminal liability. However, the Bankruptcy Code and applicable rules do allow pre-bankruptcy planning which includes paying regular expenses, certain debts, and do not require equal payments to all creditors. With proper preparation, few individual debtors in Chapter 7 are required to surrender assets for liquidation. Preparation and careful consideration in achieving legal compliance are the key to success.
There are two basic types of Bankruptcy proceedings. A filing under Chapter 7 is called liquidation. It is the most common type of bankruptcy proceeding. Liquidation involves the appointment of a trustee who collects the non-exempt property of the debtor, sells it and distributes the proceeds to the creditors. Some debts, such as alimony and child support, taxes, and fraudulent transactions are not dischargeable in bankruptcy. Filing a bankruptcy petition automatically suspends all existing legal actions and is often used to avoid foreclosure or imposition of judgment. After 45 or more days a creditor with a debt secured by real or personal property can petition the court to have the "automatic stay" of legal rights removed and a foreclosure to proceed. Once a person is declared bankrupt, they cannot file for bankruptcy again for seven years.
Chapter 11 bankruptcy allows a business to reorganize and refinance to be able to prevent final insolvency. Often there is no trustee, but a "debtor in possession," and working out a plan of reorganization often takes a substantial amount of time. The final plan often requires creditors to take only a small percentage of the debts owed them or to take payment over a long period of time. Chapter 13 is similar to Chapter 11, but is for individuals, rather than businesses, to work out payment schedules.
Creditors also may initiate adversary proceedings to determine the validity or priority of a lien, to determine the validity of a debt, to obtain an injunction, or to subordinate a claim of another creditor. The debtor in possession may institute an adversary proceeding to recover money or property for the estate. A creditors' committee may be authorized by the bankruptcy court to pursue certain legal rights which the debtor has failed to pursue.
Bankruptcy typically requires the filing of various forms, which must be carefully prepared as required by federal and local rules. Bankruptcy lawyers are experienced in filing bankruptcy petitions and other required filings, representing creditors and debtors at hearings, meetings and adversary proceedings, filing motions for relief from a stay of proceedings, objecting to claims or discharges, preparing reorganization plans, and advocating for the best outcome for their clients' interests.
In addition to bankruptcy, bankruptcy lawyers may handle the following matters: problems with debt collectors, tax problems with the Internal Revenue Service, liens, levies, wage garnishments, back tax problems, IRS offers in compromise, IRS installment plan arrangements, and IRS audits.