Bankruptcy Law Information

Bankruptcy is a Federal constitutional law formed due to the legal requirement to have uniform laws on the subject of Bankruptcy. Its proceedings are carried out in the United States Bankruptcy Courts which come under the District Court system.

There are a number of chapters in the US Bankruptcy Code that explain different modes for debt resolution. The most usual form of bankruptcy is liquidation which comes under Chapter 7 filing. It comprises of the appointment of a trustee who collects the non-exempt property of the debtor, sells it and distributes the proceeds to the creditors.

A debtor can willingly enter into Bankruptcy. It can also be entered into involuntarily by even a single creditor in the case of a huge debt amount. In the case of involuntary bankruptcy, a creditor may suffer too large an amount by way of compensation or damages.

In bankruptcy, an individual may be exempted from paying the debt from out of his own property. The exempted property or assets may include equity in a home or car, trade tools and personal effects up to some level.

One major purpose of bankruptcy is to ensure orderly and reasonable management of debt. Similarly, tools of the trade and personal effects may be a permitted exemption. Tools of trade allow a bankrupt to gear up and do some productive work at the earliest.