Bankruptcy Code
United States Code and Federal Bankruptcy Law...
"Bankruptcy Code" is the informal name for title 11 of the United States Code (11 U.S.C. §§ 101-1330), and is what makes up the federal bankruptcy law.
U.S. Bankruptcy Code is available at law libraries and can be viewed on the Internet.
New US Bankruptcy Code
Chapters, Debt Types and Forgiven Debts
Whether to file a bankruptcy case, and under which chapter bankruptcy to file, are extremely important matters that are decided according to your particular financial circumstances. No simple statement can spell out all the different things to consider. You should only make decisions after consultation with a certified credit counselor and then proceed only with the competent legal advice of an experienced bankruptcy attorney with experience in your particular state of residence.
Only a qualified and experienced Bankruptcy Lawyer can give you acurate legal advice based on your particular State Bankruptcy Law.
Find a Trustee Approved Credit Counselor in your State.
Bankruptcy Chapter Definitions
Links to Chapters Specific Bankruptcy Forms...
- Chapter 7: The chapter of the Bankruptcy Code providing for "liquidation," i.e., the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors.
- Chapter 11: A reorganization bankruptcy, usually involving a corporation or partnership. (a chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11.)
- Chapter 12: The chapter of the Bankruptcy Code providing for adjustment of debts of a "family farmer," as that term is defined in the Bankruptcy Code. It relates to an individual, individual and spouse, corporation, or partnership engaged in a farming operation who meet certain debt limits and other statutory criteria for filing a petition under chapter 12.
- Chapter 13: The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years). Although a chapter 13 filing will remain on your credit report for 10 years, there is a better chance of obtaining credit after bankruptcy in the future.
Types of Debt
In bankruptcy, your debts are characterized in four types, unsecured, secured, priority, and administrative debts:
- Unsecured Debt: A debt is unsecured if you have simply agreed to pay someone a sum of money at a particular time, and you have not pledged any real or personal property as collateral for that debt.
- Secured Debt: A secured debt is a debt that is backed by property. A creditor whose debt is "secured" has a right to take certain property to satisfy its "secured debt." For example, most people who buy new cars on credit give the lender a "security interest" (often called a "lien") in the car. This means that the debt is a "secured debt" and that the lender can take the car if the borrower fails to make payments on the car loan. A home mortgage is another example of a secured debt.
- Priority Debt: A priority debt is a debt entitled to priority in payment, ahead of most other debts, in a bankruptcy case. A listing of priority debts is given, in general terms, in 11 U.S.C. and sect 507 of the Bankruptcy Code. Examples of priority debts are some taxes, wage claims of employees, debts related to goods and services provided to a debtor's estate during a bankruptcy case, and alimony, maintenance or support of a spouse, former spouse, or child.
- Administrative Debt: An administrative debt is also a priority debt and is one created when someone provides goods or services to your bankruptcy estate. One example of an administrative debt is the fees generated by attorneys in representing the bankruptcy estate.
Forgiven Debts
Not all debts are protected by filing for bankruptcy. In the case of chapter 7 bankruptcy, the discharge does not affect a creditor's lien against collateral, so it does not prevent a creditor who holds a lien from enforcing that lien. Unless the debtor reaffirms the secured debt or redeems the collateral, the secured creditor can seize the collateral, sell it, and then use the proceeds to satisfy its claim.
See the new bankruptcy law relating to Reaffirmations and Debtors Statement of Intent and Chapter 7 Ride Through Prohibited.
U.S. Bbankruptcy Code also has provisions to exclude other types of debt (See section 523(a) of the Bankruptcy Code for the full list). Debt categories may differ according to the Chapter and State Bankruptcy Law under which you file your bankruptcy petition and receive your discharge.
Most Frequent Debts Not Satisfied in Bankruptcy:
- Tax debt - See the new bankruptcy law relating to Chapter 11 Changes in Treatment of Taxes and Chapter 13 Tax Returns are Mandatory.
- Alimony and child support payments - Child support payments generally cannot be discharged in bankruptcy, nor can back child support payments.
- Student loans - except for those whose repayment would impose an undue hardship on the debtor or his or her dependents. See the new bankruptcy law relating to Nondischargability of Student Loans.
- Debts arising from fraud, embezzlement or larceny - or in some cases debts that arise from a divorce or separation.
In Chapter 13 cases, the list of exceptions is much shorter than in Chapter 7. The Chapter 13 discharge does not forgive debts to alimony and child support obligations, to student loan debts, to certain mortgage debts, to criminal restitution obligations, and to debts for injury or death from driving while intoxicated. If the debtor completes his or her debt plan payments, the Court will enter a discharge as to all other debts.
See the new bankruptcy law relating to Chapter 11 Disposable Income and Superdischarge in Chapter 13.
