Bankruptcy Court

Bankruptcy courts in the United States are a individual units of the United States District Court, or federal court. The purpose of these courts is to specialize in the handling of bankruptcy cases.

The objective of U.S. bankruptcy courts is to give an honest person in debt a way to rebuild their life by relieving them of most of their debt and helping them to facilitate repayment of their creditors.

Bankruptcy courts seek to benefit both the creditor and the person in debt by organizing repayment plans so that the debtor can make their way out of debt and the creditor can recoup their investment.

In the days before bankruptcy courts were invented, when businesspeople were unable to pay their debts their trading benches would be broken. In severe cases debtors were sentenced to imprisonment and even death.

Today’s bankruptcy laws try to extend protection to debtors so that their lives don’t end after declaring bankruptcy.

In most cases bankruptcy courts will encourage individuals to opt for the least severe form of bankruptcy, which usually means Chapter 13 bankruptcy. With Chapter 13 the courts will offer the debtors temporary protection so that their creditors can’t collect for a specified amount of time. The purpose is to allow the person in debt some time to reorganize their finances and build up enough money to repay their lender. United states bankruptcy courts will try to discourage debtors from filing Chapter 7 bankruptcy because it results in a liquidation of the debtor’s assets.

In 1898 The Bankruptcy Act was put into place. This was the first piece of legislation to extend protection to people in debt and it has acted as the foundation of modern bankruptcy law.