What is Bankruptcy?
Bankruptcy is a process established by a set of federal laws that is designed to give debtors a “fresh start” by canceling many of their debts through an order of the court.
When a bankruptcy is filed, creditors have to stop any attempt to collect a debt, at least temporarily. There is usually immediate relief from creditor pressure, and a bankruptcy can stop a pending foreclosure sale of your home, a garnishment of your wages, or a threatened repossession. Most creditors cannot call, write or sue you after you have filed bankruptcy.
United States Bankruptcy Courts
Each of the 94 federal judicial districts handles bankruptcy matters, and in almost all districts, bankruptcy cases are filed in the bankruptcy court. Bankruptcy cases cannot be filed in state court. Bankruptcy laws help people who can no longer pay their creditors get a fresh start by liquidating their assets to pay their debts, or by creating a repayment plan.
Bankruptcy laws also protect troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation. These procedures are covered under Title 11 of the United States Code (the Bankruptcy Code). The vast majority of cases are filed under the three main chapters of the Bankruptcy Code, which are Chapter 7, Chapter 11, and Chapter 13.
Filing for Bankruptcy
Bankruptcy Basics provides basic information to debtors, creditors, court personnel, the media, and the general public on different aspects of the federal bankruptcy laws. It also provides individuals who may be considering bankruptcy with a basic explanation of the different chapters under which a bankruptcy case may be filed and answers some of the most commonly asked questions about the bankruptcy process.
In 2005, the Bankruptcy Code was amended to require that most individual debtors complete a special briefing from an approved credit counseling agency before filing a bankruptcy case. In most states, the United States trustee is responsible for approving the providers that offer this special pre-bankruptcy briefing, and in the six districts located in Alabama and North Carolina, the bankruptcy administrator assigned to those districts approve them. The United States trustee and the bankruptcy administrators maintain a list of approved providers.
