Inessa Babayeva
Business Law 3
BANKRUPTCY, DECLINING OR SOARING?
Bankruptcy law is federal statutory law contained in Title 11 of the United States Code. Congress passed the Bankruptcy Code to “establish… uniform laws on the subject of bankruptcy throughout the United States.” States cannot regulate bankruptcy but they can pass laws that govern other aspects of the debtor-creditor relationship. Bankruptcy law provides for the development of a plan that allows a debtor, who is unable to pay his creditors, to resolve his debts through the division of his assets among his creditors. An additional purpose of bankruptcy law is to allow certain debtors to free themselves of the financial obligations that they have accumulated even if their debts have not been paid in full.
There are two basic types of Bankruptcy proceedings. A filing under Chapter 7 is called liquidation which is the most common type of bankruptcy proceeding. It involves the appointment of a trustee who collects the non-exempt property of the debtor, sells it and distributes the proceeds to the creditors. Bankruptcy under Chapters 11, 12, and 13 involves the rehabilitation of the debtor to allow him to use future earnings to pay off creditors. After a bankruptcy proceeding is filed, creditors cannot look to collect their debts outside of the proceeding. The debtor is not allowed to transfer property that has been declared part of the estate subject to proceedings.
According to the Philadelphia Inquirer, bankruptcy filings plunged seventy percent last year in the United States. This change occurred after changes to federal rules made it more expensive and burdensome to file for protection from creditors. On April 16, 2007 the Administrative office of the United States Courts reported th ...