Wednesday, November 19, 2008
Bankruptcy laws are a series of federal statutes intended to get individuals and companies out from under debts that are so severe that they may otherwise never recover. By filing bankruptcy, you are essentially given a fresh start.
There are several different forms of bankruptcy. The two most common are Chapter 7 and Chapter 11.
Chapter 7 governs bankruptcy cases involving individuals. It provides for a complete liquidation of the person's assets and a complete forgiveness of debts. The assets are managed by a Trustee, who uses them to pay off all of the debts owed to creditors at a fraction of what is owed (generally less than 10 cents on the dollar).
Chapter 11 applies to companies. It is designed to reorganize the company, while keeping them in business, operating under the strict supervision of the Trustee. Under Chapter 11, creditors are legally prohibited from suing the bankrupt company, so that it has some breathing room to restructure its business and get back on its feet again. The expectation is that creditors will eventually be paid most, if not all, of what is owed to them, and that the debtor corporation will emerge from bankruptcy healthy and functional once again. This process essentially saves the company from a total liquidation and dissolution.
In today's financial crisis, many companies, most notably General Motors, are in danger of filing Chapter 11 in order to reorganize and get out from under their massive debt.
There are certain exemptions under bankruptcy laws which allow the debtor to keep certain exempt property without having to turn it over to the Trustee. Generally, this applies to the debtor's home. These exemptions are usually regulated by state law, even though bankruptcy laws are federal statutes.
The Bankruptcy Directory can help you find the right attorney to suit your individual needs. Please contact us today for a listing of lawyers in your area.