Is your debt consuming you? Do you believe you will never be able to get on top of it? Do you get further and further behind every day? You are not alone. In 2009 there were nearly one and a half million bankruptcy filings across the United States. There were 1,473,675 to be precise. Over one million of these filings were filings for bankruptcy under chapter 7 of the Bankruptcy Code.
Chapter 7 Bankruptcy – Liquidation
Chapter 7 is a liquidation provision. Certain basic necessity property is exempt from liquidation, as well as a small amount of non-basic necessity property. Nonexempt property is sold by a bankruptcy trustee to pay off creditors.
Most, if not all debt, may be extinguished entirely, such as credit card debt. Some debts cannot be discharged in bankruptcy, such as child support and tax debt.
In 2009 there were over one million chapter 7 bankruptcy filings across the United States.
Chapter 11 Bankruptcy – Reorganization
Chapter 11 is a reorganization provisions. Bankruptcy under this provision doesn’t discharge debt the way a Chapter 7 bankruptcy does. Instead it allows for reorganization, so that a business doesn’t have to go under but rather can find its way out through reorganization.
In 2009 there were just over fifteen thousand chapter 11 bankruptcy filings across the United States.
Chapter 13 Bankruptcy – Wage Earner’s Plan
Chapter 13 bankruptcy is also called the wage earner’s plan. This chapter allows individuals to develop a plan to repay all or part of their debts.
Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.
In 2009 there were over four hundred thousand chapter 13 bankruptcy filings across the United States.
Chapter 12 Bankruptcy – Family Farmers and Fishermen
Chapter 12 bankruptcy is designed for family farmers and fishermen with regular income. Chapter 12 also allows financially distressed family farmers and fishermen to propose and carry out a plan to repay all or part of their debts.
Debtors under this chapter also propose a repayment plan to make installments to creditors over three to five years.
In 2009 there were just over five hundred chapter 12 bankruptcy filings across the United States.
The Bankruptcy Court System
The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts.
Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse. In cases under chapters 7, 12, or 13, and sometimes in chapter 11 cases, this administrative process is carried out by a trustee who is appointed to oversee the case.
A debtor’s involvement with the bankruptcy judge is usually very limited. A typical chapter 7 debtor will not appear in court and will not see the bankruptcy judge unless an objection is raised in the case. A chapter 13 debtor may only have to appear before the bankruptcy judge at a plan confirmation hearing.
Usually, the only formal proceeding at which a debtor must appear is the meeting of creditors, which is usually held at the offices of the U.S. trustee. This meeting is informally called a “341 meeting” because section 341 of the Bankruptcy Code requires that the debtor attend this meeting so that creditors can question the debtor about debts and property.
A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial “fresh start” from burdensome debts. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision:
“[I]t gives to the honest but unfortunate debtor . . . a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.”