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Bankruptcy Law

Bankruptcy law provides for the development of a plan that allows a , who is unable to pay his creditors, to resolve his debts through the division of his assets among his This supervised division also allows the interests of all creditors to be treated with some measure of equality. Certain bankruptcy proceedings allow a debtor to stay in business and use revenue generated to resolve his or her debts. An additional purpose of is to allow certain debtors to free themselves (to be discharged) of the financial obligations they have accumulated, after their assets are distributed, even if their debts have not been paid in full.


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Bankruptcy law is federal statutory law contained in Title 11 of the United States Code. Congress passed the Bankruptcy Code under its Constitutional grant of authority to “establish. . . uniform laws on the subject of Bankruptcy throughout the United States.” See U.S. Constitution Article I, Section 8. States may not regulate bankruptcy though they may pass laws that govern other aspects of the debtor-creditor relationship. See Debtor-Creditor. A number of sections of Title 11 incorporate the debtor-creditor law of the individual states.

Bankruptcy proceedings are supervised by and litigated in the United States Bankruptcy Courts. These courts are a part of the District Courts of The United States. The United States Trustees were established by Congress to handle many of the supervisory and administrative duties of bankruptcy proceedings. Proceedings in bankruptcy courts are governed by the Bankruptcy Rules which were promulgated by the Supreme Court under the authority of Congress.
Information by Cornell Law School

Frequently Asked Questions

Q: Are there alternatives to filing bankruptcy?

A: If the debtor’s financial problems are temporary, he or she can request creditors to accept lower payments or grant an extended payment schedule. Creditors may be receptive to these ideas if the debtor has been a prompt payer in the past or if they wish to avoid the inconvenience of a bankruptcy proceeding. Consumer credit counselors can also help creditors work out a repayment plan. Some of these advisor's work for non-profit agencies, charging no fees, but others charge a fee or may even be unscrupulous and should therefore be avoided.

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