The U.S. Bankruptcy Code was enacted by Congress in 1978 (Bankruptcy Reform Act of 1978, Pub. L. 95-598, Nov. 6, 1978), and substantially amended in 2005 by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), Pub.L. 109–8, Apr. 20, 2005. Bankruptcy law is codified at Title 11 of the United States Code. The Federal Rules of Bankruptcy Procedure and local rules of each bankruptcy court govern the bankruptcy process. The Bankruptcy Rules also contain official forms for use in bankruptcy cases. There is a bankruptcy court in each federal judicial district in the United States.
U.S. Constitution, art. I, § 8, cl. 4:
The Congress shall have Power To . . . establish . . .uniform Laws on the subject of Bankruptcies throughout the United States.
TITLE 28—Judiciary and Judicial Procedure
U.S. bankruptcy judges are officers of the federal district courts and may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts. In cases under Chapters 7, 12, or 13 of the Bankruptcy Code, and in some Chapter 11 cases, the administrative process is carried out by a trustee who is elected by the creditors or appointed through the U.S. Trustee program to oversee the case.
The goal of federal bankruptcy laws is to give both individual and corporate debtors a financial "fresh start" from burdensome debts. The Bankruptcy Code authorizes six different types of cases, designated by chapter:
Chapter 7 (Liquidation)
Chapter 9 (Adjustment of debts of a municipality)
Chapter 11 (Reorganization)
Chapter 12 (Adjustment of debts of a family farmer or family fisherman with regular annual income)
Chapter 13 (Adjustment of debts of an individual with regular income), and
Chapter 15 (Ancillary and other cross-border cases).
Bankruptcy cases can be commenced either by the debtor (voluntary case) or by the debtor's creditors (involuntary case). Only debts arising before the date of the order for relief are discharged (11 U.S.C. § 727(b)).
Bankruptcy Rules, Forms, and Resources (Administrative Office of the U.S. Courts)
Federal Rules of Bankruptcy Procedure (U.S. Courts)
Bankruptcy Basics (Administrative Office of U.S. Courts) - a publication of the Bankruptcy Judges Division, this guide provides basic information on federal bankruptcy law for individuals who may be considering filing for bankruptcy, with basic explanations of the different chapters under which bankruptcy cases may be filed and answers to commonly asked questions about the process.
U.S. Trustee Program (Department of Justice) - this program oversees the administration of bankruptcy cases and private bankruptcy trustees and enforces the bankruptcy laws pursuant to 28 U.S.C. § 586 and 11 U.S.C. §101 et seq. The U.S. Trustee Programs has 21 regional offices nationwide and an executive office in Washington, D.C.
Bankruptcy Tax Guide (Pub. 908, Internal Revenue Service) - the IRS publishes "About Publication 908, Bankruptcy Tax Guide," which explains basic federal income tax aspects of bankruptcy and provides links to other relevant tax information.
Consumer Bankruptcy:
The most common bankruptcy filing for individuals is under Chapter 13 of the Bankruptcy Code, which:
Individuals may also file under Chapter 7, which:
Individual debtors who have debts in excess of the Chapter 13 limits, or who own substantial nonexempt assets, can also file for reorganization under Chapter 11.
The property of a bankruptcy estate is determined according to 11 U.S.C. § 541. State law governs exemption of certain property.
Commercial Bankruptcy:
A corporation or partnership can petition for bankruptcy relief under Chapters 7 or 11 of the Bankruptcy Code, but businesses often file a reorganization plan under Chapter 11 to keep their businesses alive and pay their creditors over time.
The debtor acts as its own trustee in Chapter 11 proceedings, filing a reorganization plan detailing a payment structure that will impair the rights of most or all of the creditors. The debtor's creditors must approve the filed reorganization plan. Chapter 11 permits a business to emerge from bankruptcy after the reorganization plan is completed.
