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     Understanding federal bankruptcy law and the law pertaining to your state of residence is imperative. Bankruptcy law is a specialized area of the law, and can be, at best, challenging to you as an individual as well as to your attorney.

An attorney's knowledge of federal bankruptcy law and the law pertaining to your state of residence is imperative.

Title 11 of the United States Code

     Bankruptcy law is federal in nature. Its cases are therefore all carried out in federal courts, as opposed to the courts of the distinct states and territories of the U.S. The law itself is codified in Title 11 of the United States Code ("the Bankruptcy Code"), with the jurisdictional underpinnings being found in Title 28 of the U.S. Code. The operating and procedural rules for bankruptcy cases are set forth in the Federal Rules of Bankruptcy Procedure, commonly known as the Bankruptcy Rules. These rules also set forth the Official Forms which are required to be used in bankruptcy cases.

 

Article I, Section 8

     Article I, Section 8 of the U.S. Constitution authorizes Congress to "establish ....uniform Laws on the subject of Bankruptcies throughout the United States." Congress used this constitutional mandate in enacting the Bankruptcy Act of 1898. In 1978, after years of study, Congress prepared a wholesale revision of the bankruptcy laws, the Bankruptcy Reform Act of 1978. The new law completely replaced the old law became applicable to all cases filed on and after October 1, 1979. The new cases were called "Code" cases, to distinguish them from the prior "Act" cases. Under the Code, it became easier for a debtor to discharge his or her debts.

Modifications to the Code

     Thereafter, in 1984 and 1994, there were some major modifications to the Code. In 1984, Congress clarified the jurisdictional basis for the bankruptcy court, and made union collective bargaining agreements subject to being rejected (canceled) as executory contracts under Section 365 of the Code. In 1994, Congress enacted some new requirements in Chapter 11 cases. It shortened the time allowed for a debtor in what it termed a "single-asset real estate case" to propose a reorganization plan, and also allowed a debtor to make a "small business election" to streamline the plan confirmation process.

 

Bankruptcy Cases

     There are six basic types of bankruptcy cases under the Bankruptcy Code, identified by their respective chapter designations in Title 11 of the U.S. Code. The most common are Chapter 7, 11 and 13. Less utilized are Chapters 9, 12, and 15. Selection of the proper chapter in bankruptcy law should be made only after a thorough analysis by competent counsel of the debtor's financial condition and goals.

Types of Bankruptcy (Business, Consumer and Municipal)
  • Chapter 7 - Can be filed by individuals, partnerships and corporations. The most common type of bankruptcy filing
  • Chapter 9 - Adjustment of debts of a municipality
  • Chapter 11 - Filed by large and small businesses. Individuals filing Chapter 11, are involved in business in some capacity, either as sole proprietors, or as principals of a corporation or partnership
  • Chapter 12 - Adjustment of debts of a family farmer or fisherman
  • Chapter 13 - Available for individuals only, no corporations or partnerships may file
  • Chapter 15 - Bankruptcy, reorganization and insolvency cases that have assets, debtors, creditors, and other interested parties in multiple countries

Written by Henry Rendler





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