The corpus of federal statutes and case law that controls bankruptcy cases is known as bankruptcy law. It deals with a variety of disagreements that come up in financial and economic dealings. Debtors are eligible to apply for property exemptions, which let them preserve personal belongings, business equipment, and even residences up to a specific amount of value. Any nonexempt property must also be liquidated in order to pay off unsecured creditors.
Sometimes there's no need for liquidation, particularly for people with nonexempt assets like priceless collections (like coin or stamp collections) or family heirlooms. In some situations, filing for bankruptcy enables debtors to liquidate assets and gradually pay back creditors.
This is referred to as Chapter 7 bankruptcy in the US. On the other hand, in Canada, debtors have the option to submit a consumer proposal (Division I) which suspends credit collection actions while the debtor arranges a repayment plan to creditors over a maximum of ten years for firms and three to five years for individuals.
The intricate field of bankruptcy law is regulated by numerous federal acts and regulations. Norton Bankruptcy Law and Practice, 3rd ed. (KF1524.N76722 and on Westlaw) is a thorough treatment of the subject and includes annotated legislative history from the Code's adoption to the present. Collier on Bankruptcy, 16th ed. (KF1524 on Reserve, earlier editions on HeinOnline) is another great resource. Online access is also provided by the ABA's Bankruptcy Deadline Checklist.
Your ability to retain certain assets is contingent upon the bankruptcy exemptions you assert. Exemptions are meant to safeguard the kinds of assets that people require to survive and rebuild their lives, such as clothing, household items, tools for their trades, a home, and a vehicle.
In order to pay off unsecured debts, a trustee might need to dispose nonexempt assets. The trustee will often sell the items with the highest value first. These assets include precious collections, investments in stocks, second residences, investment properties, inheritances, and other properties whose value is higher than what you owe on them.
Regular income earners can also utilize chapter 13 to prevent their property from being liquidated by creating a repayment plan that enables them to make up missed mortgage payments and retain other assets like cars, some home equity, furniture, clothing, and utilities. It's crucial to realize that doing so requires you to continue making mortgage payments on time.
The people who owe money are known as creditors. The process for deciding which creditors receive repayment and in what sequence is laid forth in bankruptcy legislation. Frequently, this changes based on whether the debt is unsecured or secured. While unsecured debts often do not recover any assets unless the bankruptcy court permits such a distribution, secured debts are allowed to reclaim the object that served as collateral for the debt.
People who have a steady source of income can file under Chapter 13, which enables them to create manageable repayment schedules for their debts that are paid off gradually. This permits people to retain different proportions of their personal cars and home equity.
Only a limited range of debts, including alimony, child support, the majority of college loans, tax obligations, and fines from criminal offenses, are often discharged by bankruptcy courts. An involuntary petition for bankruptcy, however, can be a useful option if you are being threatened by aggressive creditors who have a track record of obtaining unsecured debts and using illegal means to acquire their payments.
