A Legal Process That Relieves Debtors of the Responsibility

This publication also contains a description of liquidation proceedings under the Securities Investor Protection Act (“SIPA”). Although bankruptcy law provides for a procedure for the liquidation of a securities dealer, it is much more likely that a defaulting brokerage firm will be involved in a SIPA proceeding. SIPA`s goal is to return to investors the securities and cash left by bankrupt brokers. Since its inception by Congress in 1970, the Securities Investor Protection Corporation has protected investors who deposit stocks and bonds with brokerage firms by ensuring that each client`s assets are protected, up to a maximum of $500,000 per client. Chapter 13, entitled Adjusting the Debts of a Person with a Regular Income, is for a single debtor who has a regular source of income. Chapter 13 is often preferable to Chapter 7 because it allows the debtor to retain valuable asset such as a house, and because it allows the debtor to propose a “plan” to repay creditors over time – usually three to five years. Chapter 13 is also used by debtor consumers who are not entitled to a means-tested exemption under Chapter 7. At a confirmation hearing, the court approves or disapproves of the debtor`s repayment plan, depending on whether or not the debtor meets the confirmation requirements of the Insolvency Code. Chapter 13 is very different from Chapter 7 because, under Chapter 13, the debtor generally remains in possession of the assets of the estate and makes payments to creditors through the trustee based on the debtor`s expected income during the term of the plan. Unlike Chapter 7, the debtor does not receive immediate debt relief. The debtor must make the payments required under the plan before discharge is received. The debtor is protected from lawsuits, seizures and other actions of creditors as long as the plan is in effect.

The discharge is also somewhat broader under Chapter 13 (i.e. a larger debt is eliminated) than the discharge under Chapter 7. How do you assess the ability of the bankruptcy court to settle the debtor`s debts that have not been submitted to the trustee as debts? Is it fair to require creditors to file proof of claim in order to preserve their creditor status? Why do you think this rule does not apply to the restructuring of Chapter 11? The court official with the power to rule on federal bankruptcy cases is the U.S. Bankruptcy Judge, an official of the U.S. District Court. The bankruptcy judge can decide any issue related to a bankruptcy case, such as eligibility for filing or whether a debtor should receive a debt repayment. However, much of the insolvency proceedings are administrative and take place outside the courthouse. In cases falling under Chapters 7, 12 or 13 and sometimes in cases falling under Chapter 11, this administrative procedure shall be conducted by a representative responsible for supervising the case. The primary role of a Chapter 7 trustee in an asset matter is to liquidate the debtor`s unvaccinated assets in a manner that maximizes the return for the debtor`s unsecured creditors. The trustee does this by selling the debtor`s assets if they are free of privilege (as long as the assets are not exempt) or if they are worth more than a security or lien associated with the asset and any exceptions that the debtor holds in the asset.

The trustee may also attempt to recover money or property as part of his or her “avoidance powers.” The trustee`s avoidance powers include the power to cancel preferential transfers to creditors within 90 days of the application; avoidance of security rights and other anticipated transfers of assets that have not been properly developed at the time of the application under the non-insolvency law; and pursue non-bankruptcy claims such as fraudulent transfer and mass transfer remedies available under state law. In addition, if the debtor is a corporation, the bankruptcy court may authorize the trustee to operate the business for a limited period of time if such an operation benefits creditors and promotes the liquidation of the estate. 11 U.S.C. § 721. In order to grant the debtor a full exemption, the Bankruptcy Act allows the debtor to convert a Chapter 7 case into a subsection 11, 12 or 13(6) case for as long as the debtor is entitled to be a debtor under the new Chapter. However, the condition for the voluntary conversion of the debtor is that the case has not been previously converted from another chapter of Chapter 7. 11 U.S.C. § 706(a).

Thus, the debtor is not allowed to convert the case repeatedly from one chapter to another. A person receives relief for most of their debts in a Chapter 7 bankruptcy case. A creditor may no longer bring or continue a legal or other action against the debtor in order to collect a settled debt. But not all of a person`s debts are settled in Chapter 7. Unpaid debts include debts for child support and benefits, certain taxes, debts for certain overpayments of education benefits or loans granted or guaranteed by a government agency, debts for intentional and malicious harm caused by the debtor to another institution or to the property of another institution, debts for death or bodily injury caused by the operation of a motor vehicle by the debtors were caused while intoxicated by alcohol or other substances, and debts for certain criminal return orders. 11 U.S.C. § 523(a). The debtor remains liable for this type of debt to the extent that it is not paid in the case of Chapter 7. Debts for money or property obtained under false pretenses, debts for fraud or falsification in the course of a fiduciary activity and debts for intentional and malicious damage caused by the debtor to another company or to the property of another company will be settled unless a creditor takes legal action in time for such debts to be declared inexcusable. 11 U.S.C. § 523(c); Fed.

R. Bankr. P. 4007(c). The Bankruptcy Code provides for six basic types of bankruptcy cases, each of which is discussed in this publication. Cases are traditionally given the names of the chapters they describe. 12 Chapter 11 Õ Reorganization of the bankruptcy of companies allowing them to continue working on the repayment of their restructured debts under judicial supervision. 3 Purpose Ö Protection of debtors by enabling them to make a fresh start, protected from creditors` claims.  Fair treatment of competing creditors for debtors` assets. Article 1, Section 8 of the U.S. Constitution authorizes Congress to enact “Uniform Bankruptcy Laws.” Under this authorization, Congress enacted the Bankruptcy Code in 1978. The Bankruptcy Code, codified as Title 11 of the United States Code, has been amended several times since its adoption.

It is the uniform federal law that regulates all cases of bankruptcy. While the main advantage of bankruptcy is the elimination of certain debts, the negative consequences are very harmful. The most obvious is an immediate large and negative impact on solvency, and bankruptcy remains on your credit report for 7 to 10 years. This means it can be difficult, more expensive, or even impossible to borrow money for things like a business or a home.