Basics On Bankruptcy Law

Bankruptcy law helps a debtor develop a plan of action to resolve his debt problems. Often a division of his assets is used to pay off the claims of creditors while the remainder of the debt is wiped off the record. Your ability to reasonably pay off what you can determines the type of bankruptcy you file under the law. There are different types of bankruptcy law for both individuals and businesses, whether corporations, partnerships, or sole proprietorships.

Both the federal government and state governments have bankruptcy law. The federal bankruptcy law is located in Title 11 of the United States Code. These proceedings are supervised by the United States Bankruptcy Courts, which are part of the District Court system. Each state also has certain requirements and rules regarding bankruptcy proceedings. Check with your state to see which rules are in force in your state before filing for a bankruptcy.

Bankruptcy law provides for various types of bankruptcies. The two main types that involve individuals are Chapter7 and Chapter 13. Chapter 7 is often called the liquidation, making it the most popular form. In it, a trustee gains control of all non-exempt property owned by the debtor, sells off what can be sold, and distributes the proceeds to the creditors. All remaining debts owed to the creditors are wiped clean and removed from the debtor's legal responsibility. These proceedings take usually around 3 months to complete.

Another popular form under bankruptcy law is Chapter 13. This is basically a reorganization of a debtor's debts. A payment schedule of three to five years is drawn up and debt is paid off in more affordable means. Usually collection proceedings are dismissed and the new formula is used to satisfy creditor's claims.

According to bankruptcy law, some debts cannot be discharged in bankruptcy court. Some of them include: alimony payments, child support, federal taxes, student loans, and criminal fines. Make sure that you discuss these items with an attorney to understand the law in your state.