United States Bankruptcy Laws
As a bankruptcy attorney, I know there are a lot of questions about bankruptcy, I hope this blog will answer your questions.
The Bankruptcy laws are found in the U.S. Bankruptcy Code
which is Title 11 of the United States Code (USC)
Article 1, Section 8 of the United States Constitution
empowers Congress to enact uniform laws on Bankruptcy. Under this grant of
authority Congress passed the Bankruptcy Act of 1898, which was amended later
by the Chandler Act of 1938. The 1898 Act established the bankruptcy court
systems. The 1978 Bankruptcy Reform Act repealed the Bankruptcy Act of 1898 and
the 1978 Act created the Bankruptcy Code. In 1986 the Bankruptcy Code was
amended to add the bankruptcy trustee system to undertake the administrative
responsibilities of the Federal Bankruptcy courts. In addition the 1986
amendments added Chapter 12 to the Bankruptcy Code, which deals with
bankruptcies for family farmers. The Bankruptcy Reform Act of 1994 made
substantial changes in the ways mortgages are handled in the bankruptcy system.
The Bankruptcy Abuse, Prevention and Consumer Protection Act of 2005
established the “means tests” or thresholds that determine whether debtors
qualify for a Chapter 7 Bankruptcy or whether debtors are required to pursue a
Chapter 13 Bankruptcy. In addition, the 2005 Act extended Chapter 12
protections to family fishermen and enacted Chapter 15 to deal with
international bankruptcies.
Title 11 of the United States Code contains the following
Chapters:
1.
Chapters 1, 3 and 5 are the administrative rules
for bankruptcy cases.
2.
Chapter 7 is the liquidation provisions of the
bankruptcy code. Chapter 7 Bankruptcy is sometimes referred to as a “straight
bankruptcy” or “liquidation.” It is called a Chapter 7 Bankruptcy because the
laws and procedures governing this type of bankruptcy are found in Chapter 7 of
Title 11 of the U.S. Code. A Chapter 7 Bankruptcy takes approximately five
months to complete and in the end debtors’ “unsecured debts,” or credit card
and medical bills are discharged which means the debtor no longer has a legal
obligation to pay for those debts.
3.
Chapter 9 involves bankruptcies for municipal
governments.
4.
Chapter 11 is for commercial debtors that desire
to continue to operate a business and to repay creditors concurrently through
an acceptable plan of reorganization.
5.
Chapter 12 is for family farmers and family
fishermen.
6.
Chapter 13 provides the method by which an
individual with regular income may repay all or a portion of the debts over a
period of 36 – 60 months. It is called a Chapter 13 Bankruptcy because the laws
are detailed in Chapter 13 of Title 11 of the United States Code (USC). The
debtor’s payments are made under the supervision of the bankruptcy trustee.
When the payment plan of the 36 – 60 months is completed, the balance of the
unsecured debts are discharged.
For any questions or concerns, please feel free to contact
the law office of Arlington Heights attorney Robert S. Thomas.
1655 N Arlington Heights Rd, Suite 300West
Arlington Heights
IL 60004
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