What is the Bankruptcy Code?
Created in 1979, the Bankruptcy Code provides help for businesses or persons in financial difficulty in the form of bankruptcy chapters. Chapter 7, 11 and 13 bankruptcies are the most commonly filed chapters.
What is the difference between bankruptcy chapters (7, 11, 13)?
Often called the 'liquidation chapter,' Chapter 7 is used by individuals, partnerships, or corporations who have no hope for repairing their financial situation. In Chapter 7, the debtor's estate is liquidated under the rules of the Bankruptcy Code. Liquidation is the process through which the debtor's non-exempt property is sold for cash by a trustee and the cash is distributed to creditors.
Often called the 'reorganization chapter,' Chapter 11 allows corporations, partnerships, and individuals to reorganize, without having to liquidate all assets. In filing a Chapter 11, the debtor presents a plan to creditors which, if accepted by the creditors and approved by the Court, will allow the debtor to reorganize personal, financial or business affairs and again become a financially productive individual or business.
An individual with a regular income who is overcome by debts, but believes such debt can be repaid within a reasonable period of time, may file under Chapter 13 of the Bankruptcy Code. Chapter 13 permits the debtor to file a plan in which the debtor agrees to pay a certain percentage of future income to the Bankruptcy Court for payment to creditors. If the Court approves the plan, the debtor will be under the Court's protection while repaying such debts.
What is a motion?
A motion is a written formal statement in which the party who is requesting an action, the Movant, sets forth his grounds for the action requested. The party against whom the action is requested is the respondent.
What is an adversary proceeding?
An adversary proceeding is a lawsuit arising in or related to a bankruptcy case, filed by a party called a plaintiff” against a party called a “defendant.” Adversary proceedings are initiated by filing a document called a “complaint” with the court to resolve both federal and state law issues. Certain types of disputes cannot be handled by motion in the bankruptcy case, but instead require the commencement of an adversary proceeding.
What is a reaffirmation agreement?
A reaffirmation agreement is an agreement by a debtor to continue paying a dischargeable debt (such as an auto loan) after bankruptcy, usually for the purpose of keeping collateral (i.e. the car) that would otherwise be subject to repossession.