Bankruptcy Laws

Bankruptcy laws exist to help protect both the creditors and debtors. Bankruptcy can ruin a lot of things, but it should never ruin a person’s ability to live a happy life after they have made some mistakes.

This is the American way. A businessperson should be able to give it another try of their business fails the first time. Without bankruptcy law people would be scared to start a business in the first place.

Usually when someone declares bankruptcy, bankruptcy laws in place to dive up all of the remaining assets so they may liquidated and the proceeds be given to the creditors to recoup some of their losses.

Under some circumstances, bankruptcy laws enables the bankrupt party to stay in business so they may have the opportunity to earn some money so they are able to pay back their creditors. In some cases this may even reinvigorate the business enough to allow it to keep running.

Bankruptcy law is covered in Chapter 11 of the United States code. This is to ensure that there are uniform laws that exist through the entire country. Because capital can pass freely from state to state in the US this is essential.

Individual states cannot change or alter bankruptcy laws (although they would like to). However, individual states can make some laws that will affect the initial partnerships between creditors and business people.

Bankruptcy law in the United States is presided over by Bankruptcy courts. These courts are part of the District courts of the United States. These courts are ultimately under the jurisdiction of Congress. So in a way every state has a say in what makes bankruptcy law, although the law must be uniform.

The liquidation section of the United States Code is the section that deals with liquidation. When there is liquidation a trustee is appointed to ensure that all assets are sold at a fair price and that the proceeds are divided up equally.

Chapters 11 through 13 deal with rehabilitation of the debtor so he or she is not crippled for life. Although in most cases the debtor must still work in the future to pay off the creditors, so depending on the earning potential of the debtor this could take a long time.

Also, one bankruptcy has been filed the creditors assets are frozen so he or she cannot hide wealth from the creditors.