Bankruptcy Filing In The United States Of America

16 April 2020 by Jonathan Phillips

For many individuals and businesses, filing for bankruptcy often is considered a last resort in seeking relief from one's financial obligations. While this is certainly true in some circumstances, it's not always the case in every situation. Many times, a bankruptcy filing can be used to help restructure debt or to provide a better path to the debtor to realistically still meet their obligations but under more favorable terms. That's not to say that one should file for bankruptcy as a first resort because it can have far-reaching and significant potential legal and financial consequences down the road. 

In the United States of America, all bankruptcy filings are handled at the federal level, as outlined in the Constitution. Over the years, however, there have been numerous clarifications and codifications of federal bankruptcy law that have given it a very clear structure. Accordingly, one of the most important things any person can do when contemplating filing for bankruptcy is to find a qualified attorney. While it is possible for one to represent oneself pro se (a Latin term that roughly translates to "on one's own behalf") in a bankruptcy filing, it's generally not a good idea to do so. Even attorneys who practice bankruptcy law themselves will generally hire another bankruptcy attorney to represent them in federal court. 

In general, there are four main categories of bankruptcy filings that apply to most individuals and business in federal United States Code. They are: 

Chapter 7: The most commonly used, simplest, and fastest form of basic bankruptcy liquidation. 

Chapter 11: Typically used by businesses to restructure and/or rehabilitate debt. It can also be used by individuals, but that is far less common. It allows a business (or individual) to continue to operate normally while they follow court-approved repayment plans. 

Chapter 13: Typically used by individuals who possess a regular source of income to restructure or rehabilitate outstanding debts. 

Chapter 15: Used by both individuals and/or businesses when the outstanding debt involves parties from at least one foreign country. 

There are also other categories that apply to very specific situations, such as Chapter 9, which is only used by municipalities and/or municipal debt, or Chapter 12, which is only used by family farmers and fishers. In consulting with a bankruptcy attorney, you can go over the particular situation in which you find yourself and the attorney can advise as to which form of bankruptcy would be the best choice. 

To learn more, contact a bankruptcy attorney.

Share

Search