What Are Bankruptcy Courts?
The inevitable has happened. You are bankrupt. You have gone through your entire financial profile with a lawyer and a financial consultant and everything seems to be in order. You have acquired and have downloaded the necessary forms. You are ready to face the bankruptcy courts and suddenly you are intimidated by the whole justice system. What you should do before facing the bankruptcy courts is to find out about what they are. Do your research. It is important to do so before that first day standing before a judge at the bankruptcy courts.
First thing to remember is that cases cannot be filed in state court but at bankruptcy courts in each of the 94 federal judicial districts. This is because bankruptcy in the United States is placed under Federal jurisdiction by virtue of the United States Constitution. The constitution provides for Congress to enact "uniform laws on the subject of bankruptcies throughout the United States" although the implementation is in statute law which are incorporated within the American Bankruptcy Code,Title 11 of the United States Code, and enforced by state law.
Before you face the bankruptcy courts, it is expected that you are well versed with the conditions and the parameters of the specific "chapter" you have applied for bankruptcy under as contained in the Bankruptcy Code (Title 11 of the US Code). The different chapters are: Chapter 7 (applied for by individuals and businesses for liquidation of all assets); Chapter 9 (for municipal bankruptcies); Chapter 11 (application for rehabilitation or reorganization by large business or corporate debtors and also for very wealthy individuals); Chapter 12 (for family farmers and fishermen); Chapter 13 (applied for by individuals who want to rehabilitate their payment plans through a regular and continuing source of income); and Chapter 15 (international cases).
Bankruptcy courts expect you to know the specifics simply because the bankruptcy court's main function is for the proper legal distribution of payments to the debtors; the way in which everything must be organized to allow this to proceed in a smooth and successful manner depends on you. The most common types of personal bankruptcy for individuals of course are Chapter 7 and13. In filing under Chapter 7, a debtor must surrender all non-exempted property which is then liquidate and the proceeds distributed to the debtor's unsecured creditors, after which the debtor is now discharged from debt. There are however some conditions when discharge will be nullified such as hiding other assets or financial records. There are also some debts that are non-exempt such as child support and alimony payments. What generally happens is that most individuals who file under Chapter 7 at the bankruptcy courts can only present assets that are actually exempted such as their homes. It is also important to remember that you can only file for Chapter 7 bankruptcy only once every 8 years and even if some of your debts may have been discharged, the rights of your secured creditors to collect on the collateral you have put up continues. In filing under chapter 13, a debtor retains ownership and possession of all assets, but must promise or make arrangements to set aside a portion of all income earned to pay creditors within a time period that is generally pegged at between 3 to 5 years although components of this arrangement can vary according to different factors.
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