Bankruptcy laws have been established for corporations or individuals who find themselves in a position of not being able to repay creditors for monies owed.  The ability to repay may be based upon several factors including the current economic conditions or personal experiences including divorce, health conditions, and death.  The United States has developed Bankruptcy Laws that help businesses and individuals come up with a plan to repay or settle their accounts with their creditors.

There are several resources available to help people understand bankruptcy laws.  Corporations and partnerships must hire an attorney to file a bankruptcy case.  Individuals do not need an attorney and can represent themselves in bankruptcy court.  However, it is very important that bankruptcy cases be filed and handled correctly.  There are many rules to bankruptcy laws and failure to follow these rules may affect a debtor’s rights.  The decision to hire an attorney to represent your bankruptcy case should be given careful thought and consideration in order to protect your interest in the proceedings.

There are three main types of bankruptcy that can be filed.   Chapter 11 Bankruptcy is generally associated with the reorganization of corporations or partnerships.  People in a business can use this type of bankruptcy to propose a plan to repay their creditors and keep their business alive.  The two types of personal bankruptcy are Chapter 7 and Chapter 13.   The decision to file Chapter 7 or Chapter 13 is based upon an individual’s income. 

Chapter 7 Bankruptcy liquidates a person’s assets in order to pay back their creditors.  This type of bankruptcy begins with the debtor filing a petition with the bankruptcy court serving the area where they live.  In this type of bankruptcy, personal cars and other main assets may be ordered sold by the court in order to pay back creditors.  In some cases, individuals are able to maintain their home as long as they can demonstrate a plan in which they are able to repay the loan.

Chapter 13 Bankruptcy is also known as a wage earner’s bankruptcy.  This type of bankruptcy requires the debtor to propose a plan for repaying all or a portion of the debts in installments from their personal income.  In most cases, the debtor is able to maintain all of their personal assets with arrangements to repay their creditors.

Bankruptcy Laws are overseen by 94 federal judicial districts and in almost all districts, bankruptcy cases are filed in the bankruptcy court.  Bankruptcy cases cannot be filed in state courts.  Bankruptcy laws help people who can no longer pay their creditors get a fresh start by liquidating their assets to pay their debts, or by creating a repayment plan. 

The decision to file bankruptcy can be devastating.  A bankruptcy can have lasting effects on one’s ability to obtain credit or make purchases using credit in the future.  Bankruptcy generally has negative effects on one’s credit rating for several years.  While bankruptcy laws help individual’s get a fresh start and reorganize their debt, its overall financial effect on individuals and society can be devastating.