Personal Bankruptcy Information & Advice

Bankruptcy Law - A Layman's Perspective

Bankruptcy law is primarily comprised of the federal statutory law contained in Title 11 of the United States Code. One of the primary goals of the bankruptcy laws are to provide debtors with financial difficulty an opportunity for a fresh start.

In furtherance of this goal, bankruptcy law provides for the development of a bankruptcy plan that allows a debtor to resolve his debts through the division of his assets among his creditors. This court supervised division provides an orderly manner for the debtors non-exempt assets to be dispersed among the creditors with some measure of equality. It also also provides the debtor with assurance that when the bankruptcy is discharged they will have a fresh start free from the financial obligations incurred previous to the personal bankruptcy.

The form of the bankruptcy plan will depend on whether the debtor files a chapter 7 bankruptcy or a chapter 13 bankruptcy. A chapter 7 bankruptcy is a complete liquidation where all the debtors non-exempt assets are distributed to creditors and the debtor emerges in a relatively shorts time, usually under six months, free of the unsecured debts discharged through the bankruptcy. A chapter 13 bankruptcy is a reorganization where the debtor forms a plan that lasts from three to five years during which they make regular payments to bankruptcy court and pay down a portion of their total unsecured debt. As the end of this three to five year period the bankruptcy and all remaining unsecured debt is discharged.