Bankruptcy Law Sub Topics


Bankruptcy law is divided into two general areas—business bankruptcy and consumer bankruptcy. Business bankruptcy applies to debts associated with different types of companies, whereas consumer bankruptcy is reserved for individuals with debt problems.

While these two general categories of bankruptcy may seem easy to differentiate, various factors can complicate a filing. For example, if a person runs a small business and frequently commingles business funds and expenditures with personal funds and expenses, their creditors may be able to draw the business into a consumer bankruptcy.

If a person can afford to pay some of their creditors, they may want to use bankruptcy to restructure debts. This means that they pay out what they can over the course of the bankruptcy. At the end of the bankruptcy, creditors can no longer harass them to pay debt. If a debtor is in such dire circumstances that they simply cannot afford to repay anything, the bankruptcy court may be able to wipe out their debts entirely.

Whether a business or personal filing, the first step is to decide which chapter of bankruptcy is applicable to your situation.

Types of Bankruptcy

The most common types of filings include Chapter 7, Chapter 13, Chapter 11 and Chapter 12. Follow the links below for more detailed information on each chapter.

Chapter 7 is available to both individuals and business owners and involves a complete liquidation of a debtor’s assets to pay creditors.

Chapter 13 is primarily for consumers and is structured around a repayment plan that allows a debtor to stop creditor harassment while paying off debts over a specified time period.

Chapter 11 is used by businesses to reorganize debt so that they can remain in operation.

Chapter 12 is specific to family farms and fishermen in need of economic relief from debt, this is executed through a full or partial repayment plan. 

Preventing Debt Collection Harassment

A bankruptcy should be pre-planned to avoid complications during the process. Once a bankruptcy is filed, a number of troublesome issues are almost immediately resolved. Perhaps the most appealing is that debt collectors are put in check by an automatic stay.

Once a bankruptcy is filed, creditors can no longer harass the debtor for payment. They must go through the bankruptcy court to enact any rights they may have to collect. Failure to perfect their interest can result in a waiver of the right to collect on the debt later. If any creditor continues to harass a debtor for payment, they can also risk being held in contempt by the bankruptcy court.

Click here for more information regarding debt collection and how bankruptcy can help prevent harassment.

Hiring a Lawyer

While an effective tool for consumers to resolve burdening debt issues, bankruptcy is accompanied by complicated laws and filing processes and tends to be administrative in nature. Failure to comply with filing requirements can result in the bankruptcy court involuntarily discharging a case. Because of this, it comes highly recommended that debtors consult a bankruptcy attorney before diving in.

A bankruptcy lawyer can help determine when to file and how to file, what type of bankruptcy is right for unique situations, what rights are afforded under bankruptcy law, what petitions to file and when, and so much more. Consumer groups may advertise that they are willing to help with a bankruptcy filing, but only a licensed attorney is qualified to explain the law and how it applies to an individual situation.