What is bankruptcy? According to some definitions, bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their creditors. This can either be determined on a balance sheet basis (meaning debts exceed assets) or it can be determined because a debtor cannot pay its debts as they come due (even though its assets may exceed its debts).
A bankruptcy petition can be filed by the bankrupt individual or organization (a voluntary bankruptcy), or it can be requested by creditors (an involuntary bankruptcy) in an effort to recoup a portion of what they are owed (usually by taking advantage of the bankruptcy code's preference rules). Most bankruptcies are voluntary.
One of the primary objectives of a bankruptcy (from the debtor's viewpoint) is to get the debtor's debts discharged. Although most debts are dischargeable, some are not, such as:
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money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by false pretenses, a false representation, or actual fraud. |
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consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable. |
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cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable. |
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fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny. |
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a domestic support obligation. |
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willful and malicious injury by the debtor to another entity or to the property of another entity. |
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a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss. |
The United States federal government was given the competence to regulate bankruptcy by the United States Constitution. The United States Bankruptcy Code of 1978 is codified in Title 11 of the United States Code and consists of the following Chapters:
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Chapter 7 - Liquidation |
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Chapter 9 - Adjustment of debts of a municipality |
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Chapter 11 - Reorganization |
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Chapter 12 - Adjustment of debts of a family farmer |
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Chapter 13 - Adjustment of debts of an individual with regular income. |
While we represent creditors, bankruptcy trustees and even act as special Chapter 7 trustees, we do not generally represent debtors. We never represent debtors in filing a bankruptcy petition.