Bankruptcy was expressly provided for in Article 1 Section 8 clause 4 of the United States Constitution. Its purpose is to provide debt relief to persons and organizations facing financial challenges. Different types of bankruptcy relief are available under various chapters of the United States Bankruptcy Code. The two primary forms of bankruptcy relief for consumers are under Chapters 7 and 13.
American bankruptcy laws are recognized worldwide as much less punitive and much more compassionate to debtors than the bankruptcy laws of most other countries. In this country, bankruptcy is viewed both legally and perceptually as a means to an end, and not as “the end” of a debtor’s financial life. The Bankruptcy Act of 1898 was put into law by the United States Congress for the sole purpose of establishing that debtors have a basic right to financial relief.
The bankruptcy laws change from time to time and reflect a perpetual tug of war between the competing interests of debtors and creditors, but the concept of The Bankruptcy Act of 1898 holds true. That concept is that Americans are entitled to a fresh financial start. By recovering from your burden of debt, you can look to the future and once again be a productive member of society.
Bankruptcy law comprise six types of bankruptcy proceedings, each with its own chapter and each initiated in a federal bankruptcy court. Each bankruptcy action provides for a discharge through which the debtor is ultimately relieved of personal liability for certain debts.
Chapter 7 establishes a liquidation process for insolvent debtors with insufficient income to meet their obligations to their creditors. Under Chapter 7 bankruptcy law, a trustee assumes control of the debtor’s assets, allows the debtor to retain certain exempt property, liquidates the remaining assets, and distributes the resulting cash to the creditors. The Code sets forth specific priority rules for the distribution of the debtor’s estate. In South Carolina, it is unusual for an individual
to lose any property when a Chapter 7 bankruptcy is filed. Prior to filing for bankruptcy relief a thorough review of your assets will be made and you will know
before you file if any of your property is at risk.
Chapter 11 allows a bankrupt entity to remain in business and pay its creditors
pursuant to a court-approved reorganization plan. Most Chapter 11 filings are for
businesses but a few individual Chapter 11 cases are filed each year in South
Carolina To confirm a plan, a court must find that (1) the plan is feasible, (2) the
plan is proposed in good faith, (3) the plan complies with the Code and most
critically a sufficient number of creditors vote in favor of a plan of reorganization.
Chapter 13 makes it possible for individual human debtors with regular sources of
income to pay all or a portion of the debts over time through court-approved plans.
Remaining debts are discharged at the conclusion of the plan. It is very common for
a Chapter 13 plan to pay unsecured creditors only a few cents on a dollar. To
confirm a plan, a court must find that (1) the plan is feasible, (2) the plan is
proposed in good faith, and that (3) the plan complies with the Code. Creditors can
object to the plan but do not have the ability to vote on it.
Chapter 9 bankruptcy law creates a reorganization system for municipalities.
Chapter 12 sets forth rules for bankruptcies involving family farmers or fishermen.
Chapter 15 bankruptcy law governs cross-border cases involving property subject to the laws of the United States and at least one other country.
Some of the benefits to filing for bankruptcy protection are:
- Bring IRS seizures to a skidding halt;
- Stop repossessions;
- Stop almost every kind of lawsuit;
- Stop most evictions if bankruptcy is filed before a state court enters a judgment for possession;
- Stop foreclosures;
- Prevent your driver’s license from being suspended for unpaid fines or judgments.
Some of the actions bankruptcy will not stop:
- Governmental regulatory proceedings;
- Revocation or suspension of your driver’s license for failing to pay court-ordered dependent support;
- Criminal prosecutions;
- Proceedings against someone else who co-signed your loan, unless you file a Chapter 13 repayment plan and propose to pay the loan yourself;
- Contempt of court hearings;
- Actions to collect back child support or alimony, unless you file a Chapter 13 and propose to pay that obligation during the life of your plan.
Your bankruptcy is public information.
Bankruptcy is a matter of public record, but who is really interested? Only a bored or very nosey person will spend the time searching court documents to find out the particulars of your case. In most cases, the only people who will know about your bankruptcy petition are your creditors and the people you tell.
Your credit rating may be affected.
Filing for bankruptcy protection may have a negative effect on your credit rating, but it may be a small price to pay for peace of mind. Even with a history of bankruptcy, you still have a very good chance of obtaining credit. With a little work and perseverance, you can quickly reestablish credit. By the time most people file
for Bankruptcy relief their credit score is not good. Credit scores sometimes
actually go up after a bankruptcy case is filed
Negative consequences can result from using inexperienced counsel.
Avoiding unexpected negative outcomes is another one of the many reasons why you should consider hiring bankruptcy lawyer when contemplating bankruptcy. For example, if you have repaid loans to friends or relatives or have given them anything within the year prior to filing your petition, they could be forced to repay a trustee the money they received. Remember, there should be no surprises if you are represented by an experienced debt relief lawyer.