The Basics of a Bankruptcy Case

With the recent trend of American economics, albeit debated, leaning towards recession, many more individuals and businesses face the prospect of declaring bankruptcy. For most individuals and business owners, the swamp of financial matters, coupled with the emotional stress and relative lack of knowledge on bankruptcy proceedings, mandates seeking legal counsel in proceeding in these matters as delicately as possible. For some persons, bankruptcy proceedings can ultimately relieve their current financial burden, which will allow them to start anew. In the past, a great stigma loitered around those declaring bankruptcy, and although the circumstances prove less than ideal, you are not alone. In fact, the U.S Federal District and Circuit Courts reported 901, 927 non-business and business filing bankruptcy for the twelve months prior to March 2008. With the assistance of a bankruptcy attorney, persons can accurately assess their financial situation, informatively become aware of their legal options, and weigh the ramifications of any decision prior to acting.

Government Entities and Bankruptcy Jurisdiction

A bankruptcy case, whether business or non-business, must be filed in the federal court system in accordance with the Constitution of the United States. In Article 1, Section 8, Clause 4 of the Constitution, the founding fathers make a clear declaration mandating the United State's Congress to implement "uniform laws on the subject of bankruptcies throughout the United States." To enact further legislation to meet these deliverables, the United States Congress implemented what is now known as "Bankruptcy Code" in the section Title Eleven of the current United States Federal Code. As of 2008, 94 federal judicial districts address personal and business bankruptcy matters consistently. In essence, the federal courts do oversee all bankruptcy proceedings, however, state laws further partake a significant role in bankruptcy cases, and in virtually every instance, state laws differ on the benefits and consequences of filing for bankruptcy. Typically, the debtor faces the whims of the state where the bankruptcy is filed for in federal court; however, selecting a beneficial jurisdiction on personal preference is not feasible, as the debtor must face the music in the state where the majority of debts were incurred.

The Differing Chapters of Bankruptcy

Part of seeking legal advice concerning impending bankruptcy matters is ascertaining which chapter of bankruptcy an individual or business must file for in Federal Courts. There are differing pros and cons for each of these chapters, which can only be assessed on a case-by-case basis by a bankruptcy attorney highly familiar with bankruptcy law as well as your personal financial situation, history, and future intentions.

According to Title Eleven Bankruptcy Code Found in The United States Code, there are six versions of bankruptcy available, which include:

  • Chapter Seven: The formal liquidation of businesses and non-businesses.
  • Chapter Nine: A bankruptcy option for municipalities.
  • Chapter Eleven: The reorganization of assets and debts for businesses typically.
  • Chapter Twelve: The assistance in managing debts for farmers and anglers.
  • Chapter Thirteen: The repayment assistance for non-businesses with incomes.
  • Chapter Fifteen: The bankruptcy chapter for international cases.

The Prevalence of Filing Percentages for Business and Non-Business Entities

Once deciding, with assistance, which of these chapters fits personal or business needs for bankruptcy court filings. The process of filing for bankruptcy in Federal Courts is plausible and generally done by a bankruptcy attorney. Though each case is an individually tailored situation with an equally individualized strategy, nearly sixty-five percent of non-business filings, which totaled 539, 382 for the year prior to March 2008, come under Chapter 7. For businesses, Chapter 7 bankruptcy filings again are the most common, with 20, 633 filing in the twelve months prior to March 2008, or amounting to about sixty-seven percent of all business bankruptcy filings. In addition to Chapter 7 filings for businesses, Chapters 11, 12, and 13 consist of twenty percent, one-tenth of a percent, and eleven percent of the remaining business filings respectively. In regards to non-business filings, the predominate second option, besides Chapter 7, for individuals facing bankruptcy is Chapter 13, which an average of thirty-eight percent of persons filing for bankruptcy choose to utilize. Another option for non-businesses bankruptcy filings, although statistically exponentially less common, is Chapter 11 bankruptcy, which 697 persons chose to file under in the Federal Courts in the twelve months prior to March 2008, or a mere one-one thousandth of a percent. It is important to note, however, each bankruptcy case is unique, and keeping such information pertinently in mind, suiting your current and future financial needs to the chapter of your or your businesses desire is essential.

Outcomes of Bankruptcy Cases

Through a successful bankruptcy filing, debtors are able to develop and implement a plan to repay their creditors and return to stable financial standing. Certain aspects of bankruptcy filings allow business and non-business debtors to discharge some of their debts according to law. Through the mediation of the federal court system, creditors can expect an equitable share of their debts to be repaid in accordance with federal law, and furthermore, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 aid creditors as well as debtors in civilizing this process. For creditors, many debts once considered dischargeable are no longer so under the new act, and for debtors, anti-harassment laws and more stringent filing processes allow for the veracity of their bankruptcy claims to be acknowledged without cynicism.

Some other constraints for debtors filing for bankruptcy per the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 now include:

  • Increased debt repayment amounts
  • Less mandatory protections for those filing bankruptcy
  • Heightened attorney liability for lack of due diligence into client records
  • Required debtor education and credit counseling for bankruptcy filers
  • Additional filing fees with waivers for financial indigence or poverty
  • Increased time period restrictions between filings of non-businesses and businesses

Not only does the Act enhance the difficulty of filing for bankruptcy, but also the documentation necessary to enact a bankruptcy claim is much more involved than previously. In fact, many claims are rejected for neither merit nor accuracy, but rather, lack of documentation and preparation for the bankruptcy case in itself. An established bankruptcy attorney can assist clients, whether business or non-business, ascertain an accurate picture of their financial standing and pursue a bankruptcy case if need be.

If you are considering filing for bankruptcy and want to know more about your options, consider contacting a bankruptcy attorney for a free consultation.

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