|
Business Bankruptcy Law Proceedings
Bankruptcy is a legal procedure designed to protect debtors (both individuals and businesses) that are not able to meet their financial obligations and creditors involved. The debts are resolved with a bankruptcy law firm by supervised division of the debtor's assets among the creditors, making sure that all creditors interests are taken care of equally to a certain extent. Some bankruptcy proceedings allow a debtor to remain in business and use the revenue generated to resolve the debts. Sometimes, a debtor may be discharged of their financial obligations after their assets have been divided, though their debts are not paid completely.Bankruptcy law is a federal statutory law, so, though the states can't regulate bankruptcy, they can pass laws that govern other aspects of the debtor-creditor relationship. It therefore helps to be aware about the different bankruptcy law changes and updates. The United States Bankruptcy Courts are a part of the District Courts of the United States. The proceedings for bankruptcy are supervised by and litigated in these courts. Generally the parties involved in bankruptcy seek services of a bankruptcy law firm. This may be for commercial or personal bankruptcy law related service.
Chapter 11 bankruptcy is used by businesses. Business bankruptcy law is too complex and costly for individuals. Business bankruptcy law allows a business to remain in operation while protecting it from some debts.
Federal Bankruptcy Law Proceedings
Some of the specific chapters of the federal bankruptcy law are Chapter 7 (also called straight bankruptcy), Chapter 11, Chapter 13 (also called wage-earner's bankruptcy) and Chapter 20. Bankruptcy law changes from time to time however there are two types of bankruptcy proceedings. The most common is a filing under Chapter 7, called liquidation. Proceedings under Chapters 11, 12, and 13 allow a debtor to use future earnings to repay creditors.
Under Chapter 7 bankruptcy, a trustee is appointed to oversee the property. The trustee sells the non-exempt property of the debtor and distributes the proceeds equally among the creditors. Depending on the laws of the state, the debtor may be allowed to keep some personal property and most debts are cancelled.
In a Chapter 13 bankruptcy, the borrower proposes a plan for repaying a portion of the debt in installments from the borrower's income. If the court approves, a trustee may be appointed to collect payments and distribute them to the creditors, and to supervise the debtor's compliance with the repayment plan. The debtor will have to pay a substantial fee to the trustee.
In a Chapter 20 bankruptcy, a Chapter 7 bankruptcy is filed to discharge unsecured debts, following which a Chapter 13 bankruptcy is filed to allow the debtor to make mortgage payments. Not all jurisdictions allow debtors this option.
Consumer debtors mostly relating to personal bankruptcy law use Chapter 7 or Chapter 13, while corporations and partnerships use Chapter 11 of the Federal Bankruptcy Act.
Creditors cannot seek compensation outside of the proceeding once bankruptcy is filed. The debtor may voluntarily enter into bankruptcy or the creditors can initiate it. Bankruptcy must always be used as a last resort under extremely difficult financial conditions because of its long-lasting consequences. Once the bankruptcy proceeding ends, the court discharges the borrower from the debts. The record of the bankruptcy may remain in the debtor’s credit for up to ten years.
We thank you for visiting our directory, and wish you well in whatever endeavor brought you here. We are constantly adding new information and resources to our site, both general and state specific in nature, so check back often. |
