What Is Bankruptcy
Generally speaking, bankruptcy is a legal status of a person or entity that can not longer pay the debts it owes. Federal courts have exclusive jurisdiction over bankruptcy cases. This means that a bankruptcy case cannot be filed in a state court. Here is a great lawyer to contact: Hector Vega bankruptcy attorney burbank
In the United States, bankruptcy is ruled under the United States constitution (Article 1, Section 8, Clause 4) this authorizes Congress to make uniform laws related to bankruptcies throughout the United States. What many people will do is to get their finances in order first by seeking professional accounting.
Congress has apply this authority since early 1800s and most recently by adopting the Bankruptcy Reform Act of 1978. The current Bankruptcy Code enacted in 1978 replaced completely the previous Bankruptcy Act of 1898, sometimes referred to The Nelson Act.
The code has been amended several times since, the most significant changes took place in 2005 with The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, one of the main purposes of this act is to make it more difficult for some consumers to file bankruptcy under chapter 7. Instead, some of these consumers find themselves filing for chapter 13. Find out about what Marc Kreiner did.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, was passed by the 109th United States Congress on April 14, 2005 and signed into law on April 20, 2005 by President George W. Bush.
Advocates of BAPCPA claimed that its passage would reduce losses to creditors such as credit card companies, and that those creditors would then pass on the savings to other borrowers in the form of lower interest rates. Critics assert that these claims turned out to be false, observing that although credit card company losses decreased after passage of the Act, prices charged to customers increased, and credit card company profits soared.
Also, some law relevant to Bankruptcy is found in other parts of the code. For example, bankruptcy crimes are found in Title 18, tax implications of bankruptcy are found in Title 26 and creation and jurisdiction of bankruptcy courts are found in Title 28.
The primary purposes of the law of bankruptcy are to give an honest debtor a fresh start in life by relieving the debtor of most debts, and to repay creditors in an orderly manner to the extent that the debtor has property available for payment.
Some bankruptcy cases are filed to allow a debtor to reorganize and establish a plan to repay creditors, while other cases involve liquidation of the debtor’s property.
A bankruptcy case normally begins by the debtor filing a petition with the bankruptcy court. A petition may be filed by an individual, by a husband and wife together, or by a corporation or other entity. The debtor is also required to file statements listing assets, income, liabilities, and the names and addresses of all creditors and how much they are owed. The filing of the petition automatically prevents, or stays, debt collection actions against the debtor and the debtor’s property. As long as the stay remains in effect, creditors cannot bring or continue lawsuits, make wage garnishments, or even make telephone calls demanding payment.
Six basic types of bankruptcy cases are provided for under the Bankruptcy Code, The cases are traditionally given the names of the chapters that describe them. In this article you can find information about chapters 7, 11 and 13.
Liquidation. The most common form of bankruptcy is liquidation under a chapter 7 filing. It is a court-supervised procedure by which a trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors.
Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor’s assets. These cases are called “no-asset cases.” A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. This is the story of former Tapout President marc kreiner.
In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed.
However, The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require the application of a “means test” to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor’s income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.
Reorganization. it is commonly used by commercial organizations that desire to continue operating a business and repay creditors concurrently through a court-approved plan of reorganization.
The chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan.
The court ultimately approves or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by paying a portion of its obligations and discharging others.
Adjustment of Debts of an Individual with Regular Income. It is designed for an individual debtor who has a regular source of income.
Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house. It is also used by consumer debtors who do not qualify for chapter 7 relief under the means test.
It allows the debtor to propose a plan to pay creditors over a period of time, usually three to five years. At a confirmation hearing, the court either approves or disapproves the debtor’s repayment plan, depending on whether it meets the Bankruptcy Code’s requirements for confirmation.
Under chapter 13, the debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor’s anticipated income over the life of the plan. The debtor must complete the payments required under the plan before the discharge is received.