In the United States, bankruptcy is governed by federal law. The United States Constitution (Article 1, Section 8, Clause 4) authorizes Congress to impose a "uniform Law on the Bankruptcy issue throughout the United States." Congress has exercised this authority several times since 1801, most recently by adopting the Bankruptcy Reform Act of 1978, as amended, codified in Title 11 of the United States Code and commonly referred to as "Bankruptcy Code" ("Code "). The Code has undergone several changes, with the most significant changes recently enacted in 2005 through the Prevention of Bankruptcy Abuse and the Consumer Protection Act of 2005 (BAPCPA). Some laws relevant to bankruptcy are found elsewhere in the United States Code. For example, the crime of bankruptcy is found in Title 18 of the United States Code (Crime). The implications of bankruptcy taxes are found in Title 26 of the United States Code (Internal Revenue Code), and the creation and jurisdiction of bankruptcy courts are found in Title 28 of the United States Code (Judicial and Judicial Procedure).
While bankruptcy cases are filed in the United States Bankruptcy Court (US District Court unit), and federal laws regulate procedures in bankruptcy cases, state laws are often applied when determining property rights. For example, laws governing the validity of liens or rules protecting certain property from creditors (known as exceptions) may be derived from state or federal law. Because state legislation plays a major role in many bankruptcy cases, it is often unwise to generalize some bankruptcy issues across the country.
Video Bankruptcy in the United States
Histori
Prior to 1898, there were some short-lived federal bankruptcy laws in the US. The first is the Bankruptcy Act of 1800 which was revoked in 1803 and followed by the action of 1841, which was revoked in 1843, and then the act of 1867, which was amended in 1874 and revoked in 1878.
The first modern bankruptcy law in America, sometimes called "Nelson's Law", was originally enacted in 1898. The Bankruptcy Code is currently enacted in 1978 by Ã, § 101 of the Bankruptcy Reform Act of 1978, and generally becomes effective on October 1, 1979. The current code completely replaces the previous Bankruptcy Act, the "Chandler Act" of 1938. The Chandler Act provides unprecedented authority to the Securities and Exchange Commission in the administration of bankruptcy filings. The current code has been changed many times since 1978. See also Prevention of Bankruptcy Abuse and Consumer Protection Act of 2005.
Maps Bankruptcy in the United States
Chapters of the Bankruptcy Code
Entities seeking help under the Bankruptcy Code may petition for assistance under a number of different chapters of the Code, depending on circumstances. The title of 11 â € <â €
Liquidation under Chapter 7 filing is the most common form of bankruptcy. Liquidation involves appointing a trustee collecting property that is not excluded from the debtor, selling it and distributing the proceeds to the creditor. Because each country allows debtors to keep important properties, chapter 7 cases are often the case of "no assets", which means that the bankrupt estate does not have any assets that are not excluded to fund a distribution to creditors.
Chapter 7 bankruptcy runs out after 10 years
The United States bankruptcy law significantly changed in 2005 with the passage of BAPCPA, which made it more difficult for consumer borrowers to file for bankruptcy in general and Chapter 7 in particular.
The BAPCPA lawyer claims that his share will reduce losses for creditors such as credit card companies, and that the creditor will then provide savings to other borrowers in the form of lower interest rates. Critics assert that this claim was wrong, observing that although credit card company losses decline after the passage of the Act, the prices charged to customers increase, and the profit of credit card companies increases.
Chapter 9: Reorganization for municipalities
Chapter 9 bankruptcy is only available for the city. Chapter 9 is a form of reorganization, not a liquidation. Notable examples of city bankruptcies include Orange County, California (1994-1996) and the bankruptcy of Detroit, Michigan in 2013.
Chapter 11, 12 and 13: Reorganization
Bankruptcy under Chapter 11, Chapter 12, or Chapter 13 is a more complicated reorganization and involves allowing the debtor to keep part or all of his property and to use future earnings to pay off creditors. Consumers are usually file chapters 7 or chapter 13. Chapter 11 submissions by individuals are allowed, but are rare. Chapter 12 is similar to Chapter 13 but is available only to "family farmers" and "family fishermen" in certain situations. Chapter 12 generally has better requirements for debtors than comparable Chapter 13 cases will be available. Recently in mid-2004 Chapter 12 was scheduled to end, but at the end of 2004 it was extended and made permanent.
Chapter 15: Cross-border bankruptcy
Prevention of Bankruptcy Abuse and the Consumer Protection Act of 2005 added Chapter 15 (in lieu of section 304) and addressing cross-border insolvency issues: foreign companies with US debt.
Features of US bankruptcy law
Voluntary versus non voluntary bankruptcy
As a threshold issue, bankruptcy cases are voluntary or unintentional. In cases of voluntary bankruptcy, in charge of the majority of cases, the debtor filed a petition to a bankruptcy court. With an unintentional bankruptcy, the creditor, not the debtor, filed a petition into bankruptcy. However, unintentional requests are rare, and sometimes used in business arrangements to force companies into bankruptcy so that creditors can enforce their rights.
Properties
Except in Chapter 9 case, the commencement of bankruptcy cases creates "real". Generally, the debtor creditors should see the assets of the property to satisfy their claims. Plantations comprise of all debtor property interests at the time of commencement of the case, subject to certain exceptions and exceptions. In the case of a married person in a community property status, the property may include the property interests of a particular community of the debtor's spouse even if the spouse has not filed for bankruptcy. Housing may also include other items, including but not limited to property obtained on the testament or inheritance within 180 days of the beginning of the case.
For federal income tax purposes, the individual bankruptcy in the case of Chapter 7 or 11 is a separate taxable entity separate from the debtor. The bankruptcy property of a company, partnership, or other collective entity, or individual property in Chapters 12 or 13, is not a separate taxable entity separate from the debtor.
Bankruptcy Court
In North Pipeline Co v. Marathon Pipe Line Co. , the United States Supreme Court declares that certain provisions of the law relating to Article I bankruptcy judge (which is not lifelong tenor "Article III" judge) is unconstitutional. Congress responded in 1984 with changes to correct constitutional defects. Under the revised law, the bankruptcy judge in every district of justice is the "unit" of the applicable United States District Court. The judge shall be appointed for a term of 14 years by the United States Court of Appeal for the circuit in which the applicable district is situated.
The United States District Court has problem-subject jurisdiction over bankruptcy issues. However, each district court may, by order, "refer" the bankruptcy problem to the Bankruptcy Court, and most district courts have a "reference" standing for that effect, so that all bankruptcy cases are handled by the Bankruptcy Court. Under unusual circumstances, the district court may "withdraw a reference" (ie , take a particular case or proceed in a case away from the bankruptcy court) and decide the matter itself.
The decision of the bankruptcy court in general may be appealed to the district court, and then to the Court of Appeals. However, in some separate court jurisdictions called the Bankruptcy Appeals Panel (composed of bankruptcy judges) hears certain requests from bankruptcy courts.
United States Trustee
The United States Attorney General appoints a separate United States Trustee for each of the twenty-one geographical regions for a period of five years. Each Trustee is removed from the office by and works under the general supervision of the Attorney General. The US Trustees maintain a regional office in accordance with the federal judicial district and are administratively supervised by the Executive Office for United States Supervisors in Washington, DC Every United States Trustee, an officer of the US Department of Justice, is responsible for maintaining and supervising panels from personal guardians to cases bankruptcy chapter 7. Trustee has other duties including the administration of most cases of bankruptcy and trustee. According to Article 307 of Title 11 of the US Code, the US Trustee "may file and may appear and be heard about any matter in any case or continue" in bankruptcy except to submit a reorganization plan in the case of chapter 11.
Auto Stay
The Bankruptcy Code Ã,§ 362 imposes an automatic delay when the bankruptcy petition is filed. Automated generally generally prohibits the commencement, enforcement or appeal of any act and judgment, judgment or administration, against the debtor for the collection of claims arising before the filing of the bankruptcy petition. Automatic Stay also prohibits the collection and process actions directed to the property from the real bankruptcy itself.
In some courts, a violation of a stay is treated as null and void as a legal matter, although the court may terminate the residence to effect an act that does not apply. Other courts treat offenses as voidable (no need to cancel ab initio ). Any breach of the stay may result in the damage being assessed against the offending party. Unintentional violations of the period of stay are often excused without penalty, but a deliberate offender is liable for punitive damages and may also be found as an offense against the court.
A secured creditor may be permitted to collect the applicable collateral if the first creditor obtains the consent of the court. Permission is requested by the creditor by filing a motion for assistance from staying automated. Courts must provide motions or provide adequate protection to creditors who are guaranteed that the value of their collateral will not be reduced during the period of stay.
Without bankruptcy protection from automatic residence, creditors may race to the courthouse to improve their position against the debtor. If the debtor's business faces a temporary crisis, but can survive in the long run, it may not survive being "run" by creditors. Running can also generate waste and injustice among creditors who are in the same location.
Bankruptcy Code 362 (d) provides 4 ways for creditors to get automatic removal.
Evasion avoidance
The debtor, or guardian representing them, obtains the ability to refuse, or avoid the actions taken with respect to the debtor's property for a specified time prior to the filing of bankruptcy. While detailed avoidance measures are nuanced, there are three general categories of evasion measures:
- Preferences: 11 AS. 547
- Fraudulent federal transfers: 11 US. 548
- Non-bankruptcy legal creditor: 11 US 544
All avoidance measures seek to limit the risk of legal systems accelerating financial deaths of financially unstable debtors who have not declared bankruptcy. The bankruptcy system in general seeks to reward creditors who continue to expand financing to debtors and prevent creditors from accelerating their debt collection efforts. Evasion measures are some of the most obvious mechanisms to drive these goals.
Despite the apparent simplicity of these rules, a number of exceptions exist in the context of each category of avoidance measures.
Preferences
Preferential actions generally permit the trustee to avoid (that is, to cancel a legally binding transaction) of certain transfer of the debtor's property in favor of the creditor where the transfer takes place on or within 90 days from the date of filing a bankruptcy petition. For example, if a debtor has a debt to a creditor who is unfriendly and indebted to an unfriendly creditor, and pays a friendly creditor, and then declares bankruptcy one week later, the trustee can return the money paid to a friendly creditor under 11 USC à , § 547. While this "reach back" period is usually extended 90 days back from the date of bankruptcy, the amount of time is longer in the case of an "insider" - usually one year. Insiders include family and close business contacts from the debtor.
Transfer cheats
The bankruptcy law of cheating transfers is similar in practice to the law of transfer of non-bankruptcy fraud. However, some terms are more generous in bankruptcy than on the contrary. For example, the law of restrictions in bankruptcy is two years compared to shorter time frames in some non-bankruptcy contexts. Generally fraudulent transfer actions operate in the same way as avoiding preferences. But the act of transfer fraud, sometimes requires showing the intention to protect the property from the creditor.
In general, asset conversion without installment becomes an excluded asset on the night of bankruptcy will not be an indication of fraud. However, depending on the number of exceptions and circumstances surrounding the conversion, the court may consider the conversion to be a fraudulent transfer. This is especially true when the number of conversions is nothing more than a temporary setting. Cases that convert non-existent into excluded assets to fraudulent transfers tend to focus on the existence of independent reasons for conversion. For example, if a debtor buys a residence protected by the exclusion of a guesthouse with a view to staying in such a residence that will become an allowable conversion into an uncollected property. But where the debtor buys a residence with all their available funds, leaving no money for life, which assumes that the conversion is temporary, shows fraudulent transfers. The court sees the transfer time as the most important factor.
Non-bankruptcy legal creditor - "Strong Arm"
Strength evasion of strong arm starts from 11 U.S.C. Ã, § 544 and permit the trustee to exercise the rights of the borrower in the same situation under the relevant state law. Specifically, Ã, § 544 (a) gives the trustee the rights to avoid (1) the lien creditor of the judiciary, (2) the dissatisfied lien creditor, and (3) the bonafide buyer of the real property. In practice this evasion force often overlaps with preferences and avoids of fraud transfers.
The creditors
Secured creditors whose security interests survived the beginning of the case may look at property that is the subject of their security interest, having obtained a court's consent (in the form of assistance from automatic delays). The security interest, created by so-called secure transactions, is a lien of the debtor's property.
Unsecured creditors are generally divided into two classes: unsecured priority creditor and unsecured creditor general. The unsecured priority creditor is subdivided into classes as defined in law. In some cases, property assets are insufficient to pay all creditors without full priority guarantees; in such cases, the unsecured general creditor receives nothing.
Due to priority and feature ranking of bankruptcy ordering reservations, the debtor sometimes does not deserve to collude with others (which may be related to the debtor) to prefer them, by for example giving them security interests in other unpaid assets. For this reason, the bankruptcy trustee is allowed to reverse certain transactions of the debtor within the period of time prior to the date of filing bankruptcy. The duration varies depending on the relationship of the parties with the debtor and the nature of the transaction.
In Chapters 7, 12 and 13, the lender must file a "claim proof" to get paid. In the case of Chapter 11, the creditor is not required to submit a claim of claim (ie, evidence of claim "is deemed filed") if the creditor's claim is registered on the debtor's bankruptcy schedule, unless the claim is scheduled as "debated, conditional, or not suffocated." If the creditor's claim is not listed in the schedule in the case of Chapter 11, the creditor must submit a proof of claim.
Execution contract
The trustee of bankruptcy may refuse certain executive contracts and unexpired leases. For the purpose of bankruptcy, the contract is generally considered to be the executor when both parties to the contract have not fully carried out the material obligations of the contract.
If the Trustee (or debtors in possession, in many chapters 11 cases) refuses the contract, the debtor's bankrupt property is subject to a breach of ordinary contract, but the amount of damages is liability and generally treated as an unsecured claim.
Committee
Under several chapters, especially chapters 7, 9 and 11, committees of various stakeholders are appointed by bankruptcy courts. In Chapters 11 and 9, these committees consist of entities holding the seven greatest claims of the kinds represented by the committee. Other committees may also be appointed by the court.
The Committee has daily communications with debtors and debtor advisers and has access to various documents as part of their functions and responsibilities.
Exempt property
Although in theory all debtor properties that are not exempt from property under the Bankruptcy Code belong to real ( ie , automatically transferred from debtors to real) at the commencement of a case, individual debtors (not partnerships, corporations, etc.) may claim certain items as "exempt" and thereby store such items (subject, however, to any legitimate or other confiscated liens). An individual debtor may choose between a "federal" exemption list and an exemption list provided by state law where the debtor filed a bankruptcy case unless the state in which the debtor filed a bankruptcy case has enacted a law prohibiting the debtor from choosing an exception on the federal list. Nearly 40 countries have done so. In countries where the debtor is allowed to choose between federal and state exceptions, the debtor has the opportunity to choose the exception that best benefits him and, in most cases, may alter at least part of his property from non-free Form (for example, cash) to free the form (for example, an increase in home equity made using cash to pay the mortgage) before filing a bankruptcy case.
Liberation laws vary widely from state to state. In some countries, excluded properties include home or car equity, trading tools, and some personal effects. In other countries the asset classes such as trading tools will not be excluded by their class except as far as claimed under the more general exemption for private property.
One of the main goals of bankruptcy is to ensure sound and orderly debt management. Thus, exceptions to personal effects are considered to prevent punitive seizures of few or no economic value items (personal effects, personal care items, ordinary clothing), as these do not promote desired economic outcomes. Similarly, trading tools may, depending on available exceptions, be the permitted exception because their ongoing ownership allows the bankrupt debtor to move forward into productive employment as soon as possible.
Prevention of Bankruptcy Abuse and the Consumer Protection Act of 2005 put pension plans that are not subject to the Employees' Retirement Income Act of 1974 (ERISA), such as the 457 and 403 (b) plans, in the same status as ERISA qualified plans with regard to status exemptions which is similar to extravagant trust. SEP-IRA and SIMPLEs are still outside federal protection and must rely on state law.
Trust customer list
Most states have property laws that allow confidential agreements to contain legally enforceable restrictions on the transfer of profitable interests in trust (sometimes known as "anti-alienation provisions"). The anti-alienation provisions in general prevent the beneficiary's creditors from obtaining the beneficiary part of the trust. Such trust is sometimes called extravagant trust. To prevent fraud, most countries allow this protection only to the extent that the beneficiary does not transfer the property to a trust. Also, such provisions do not protect cash or other property after transferred from trust to the heirs. Under the US Bankruptcy Code, the provision of anti-alienation in extravagant trust is recognized. This means that the recipient's share of trust generally does not belong to the bankruptcy property.
Redemption
In the case of the liquidation of Chapter 7, an individual debtor may exchange "certain tangible personal property intended primarily for personal, family, or household use" encumbered by the lien. To qualify, the generally good property (A) must be exempt under Section 522 of the Bankruptcy Code, or (B) must have been abandoned by the guardian under section 554 of the Bankruptcy Code. To redeem its property, the debtor shall pay to the lienholder the full amount of an acceptable claim applicable to the property.
Debit debtor
Key concepts in bankruptcy include debtor debit and related "new beginning". Discharge is available in some but not all cases. For example, in the case of Chapter 7 only individual debtors (not corporations, partnerships, etc.) can accept the release. Discharge is also believed to play an important role in the credit market by encouraging lenders, who may be more sophisticated and have better information than debtors, to monitor debtors and limit risk taking.
The effect of bankruptcy is to remove only the debt private of the debtor, not the obligation in the brake for the secured debt to the limit of the value of the collateral. The term " in brakes " basically means "with respect to the thing itself" (ie, collateral). For example, if a debt in the amount of $ 100,000 is guaranteed by a property with a value of only $ 80,000, a $ 20,000 shortfall is treated, in bankruptcy, as an unsafe claim (though that's part of "safe" debt). The $ 80,000 portion of the debt is treated as a guaranteed claim. Assuming the debit is given and no shortage of $ 20,000 is paid (eg, due to a lack of funds), a shortfall of $ 20,000 - the debtor is personally liable - discarded (assuming non-non-recoverable debt under other Bankruptcy Code provisions). The $ 80,000 portion of debt is a liability in brake, and it is not disposed of by court release orders. This obligation can be met by the creditor who takes the asset itself. An important concept is when commentators say that debt "can be discarded," they refer only to the debtor's personal liability on debt. As far as responsibility is covered by the value of collateral, debt is not released.
This analysis assumes, however, that the collateral does not increase in value after the commencement of the case. If the collateral increases in value and the debtor (not the inheritance) keeps the collateral (for example, when an asset is excluded or abandoned by the trustee back to the debtor), the creditor's security interest may or may not increase. In situations where the debtor (not the creditor) is allowed to benefit from the increase in the value of the collateral, the effect is called "lien stripping" or "peel". Stripping Lien is allowed only in certain cases depending on the type of collateral and the special chapter of the Code in which the debit is given.
The disposal also does not remove certain rights of the creditor to set off (or "offset") certain joint debts owed by the creditor to the debtor against certain claims of the creditor to the debtor, in which both the debt owed by the creditor and the claim against the debtor arose before the start of the case.
Not every debt can be disposed under every chapter of the Code. Certain taxes payable to Federal, state or local government, student loans, and child support obligations can not be eliminated. (Secured student loans may be eliminated, however, if the borrower applies in a difficult trial to win against a lender initiated by a grievance to determine the debit.Also, the debtor may petition the court for "termination of financial relations", but such disbursement grants that's rare.)
Debtor's obligations on secured debt, such as mortgages or mechanical lien at home, may be discarded. The effects of a mortgage or mechanical lien, however, can not be disposed of in many cases if the lien is affixed before filing. Therefore, if the debtor wants to retain the property, the debt should usually be paid accordingly. (Note also avoidance of lien, reaffirmation agreement) (Note: there may be additional flexibility available in Chapter 13 for debtors dealing with oversecured collateral such as financed cars, provided that excess assets are not the primary dwelling place of the debtor.)
Any debt that is marred by any of the various wrongful acts recognized by the Bankruptcy Code, including defamation, or consumer purchase or advances above a specified amount in a short period of time prior to archiving, can not be disposed of. However, some types of debt, such as debt borne by fraud, may be discarded through Chapter 13 super releases. Overall, in 2005, there were 19 general categories of debt that can not be dismissed in Chapter 7 bankruptcy, and less debt that can not be disposed under Chapter 13. An entity that can not be a debtor
Part of the Bankruptcy Code that governs the entity that is permitted to apply for bankruptcy is 11 USC Ã,§Ã, 109. Banks and other depository institutions, insurance companies, trains, and certain other financial institutions and entities regulated by federal and state. government and Private and Personal Trusts, except Statutory Business Trusts, as permitted by some States, may not be a debtor under the Bankruptcy Code. In contrast, state and federal laws specifically regulate the liquidation or reorganization of these companies. In the US context at least, it is not right to refer to a bank or insurance company as "bankrupt". The terms "bankruptcy", "in liquidation", or "in curators" will be appropriate under certain circumstances.
Status of certain defined benefit plan benefits under bankruptcy
The Benefit Pension Guaranty Corporation (PBGC), a US government company that guarantees certain defined benefit pension plans, may declare rights to bankruptcy under one of two separate statutory provisions. The first is found in the Internal Revenue Code, at 26 U.S.C.Ã, §§§12 (n), which specifies that the liens owned by PBGC have tax lien status. Under this provision, the contribution of an unpaid mandatory pension must exceed one million dollars for the lien to arise.
The second law is 29 U.S.C.Ã,§§ 1368, where PBGC liens have a tax lien status in bankruptcy. Under this provision, liens shall not exceed 30% of the net worth of all persons responsible under a separate provision, 29 U.S.C.Ã, Ã,§ 1362 (a).
In bankruptcy, the levy of the PBGC (such as Federal tax lien) generally does not apply to certain enhanced competitor's liens before notice of the PBGC charges are filed.
The cost of bankruptcy
Ninety-one percent of US people filing for bankruptcy hire an attorney to petition their Chapter 7. The typical cost of a lawyer is $ 1,170.00. The alternative to filing with a lawyer is: a pro se submission, meaning without an attorney, requiring someone to fill at least sixteen separate forms, hire a petitioner (who has a poor track record and an unsuccessful case), or use an online software to produce a petition.
The US Bankruptcy Court also charges a fee. The amount of these fees varies depending on the Bankruptcy Chapter being filed. By 2016, the filing fee for Chapter 7 is $ 335 and $ 310 for Chapter 13. It is possible to apply for an installment payment plan in case of financial difficulties. Additional charges apply to add creditors after filing ($ 31), change case from one chapter to another ($ 10- $ 45), and reopen the case ($ 245 for Chapter 7 and $ 235 in Chapter 13).
Bankruptcy crime
In the United States, criminal provisions related to bankruptcy fraud and other bankruptcy crimes are found in sections 151 to 158 of Title 18 of the United States Code.
Bankruptcy scams include filing bankruptcy petitions or other documents in case of bankruptcy for the purpose of trying to execute or hide schemes or intelligence to cheat. Bankruptcy fraud also involves making false or fraudulent representations or claims in connection with a bankruptcy case, either before or after the commencement of a case, for the purpose of trying to execute or hide a scheme or intelligence to deceive. Bankruptcy fraud can be fined, or up to five years in prison, or both.
Consciously and fraudulently hiding the estate of a custodian, trustee, marshal or other court clerk is a separate offense, and may also be punished by a fine, or up to five years in prison, or both. The same penalty may be imposed to consciously and fraudulently conceal, destroy, injure, falsify, or make false entries in any books, documents, records, papers or other recording information relating to the property or financial affairs of the debtor after the case has been filed.
Certain violations of fraud in relation to bankruptcy cases may also be classified as "extortion activities" for purposes of the Law of Affected Organizations and Random Checks (RICO). Any person receiving income directly or indirectly derives from the "pattern" of such extortion activity (generally, two or more offensive measures within a period of ten years) and which uses or invests any portion of that income in the acquisition, establishment, or the operation of any company involved in (or affecting) interstate or foreign commerce may be punished up to twenty years in prison.
Bankruptcy crimes are prosecuted by the US Attorney, usually after references from the United States Trustee, legal guardian, or bankruptcy judge.
Bankruptcy fraud can also sometimes lead to criminal prosecution in state courts, under alleged theft of goods or services obtained by a debtor whose payment, in whole or in part, is spared by filing for bankruptcy fraud.
Bankruptcy and federalism
On January 23, 2006, the Supreme Court, at Central Virginia Community College v. Katz , refusing to apply immunity to state sovereignty from Seminole Tribe v. Florida , to defeat a guardian of action under 11 USC Ã,§Ã, 547 to recover preferential transfers made by the debtor to state institutions. The court ruled that Article I, article 8, paragraph 4 of the US Constitution (empowering Congress to stipulate a uniform law on bankruptcy issues) overturns state sovereign immunity in clothing to recover special payments.
Social and economic factors
In 2008, there were 1,117,771 filing bankruptcies in US courts. Of them, 744,424 is chapter 7 bankruptcy, while 362,762 is chapter 13.
Personal bankruptcy
Personal bankruptcy may be caused by a number of factors. In 2008, over 96% of all bankruptcy filings were non-business submissions, and of those, about two-thirds were chapter 7 cases.
Although the cause of individual bankruptcies is complex and diverse, the majority of personal bankruptcy involve large medical bills. Personal bankruptcies are usually filed under Chapter 7 or Chapter 13. Personal Chapter 11 bankruptcy is relatively rare. The American Journal of Medicine says more than 3 out of 5 personal bankruptcies are due to medical debt.
Corporate bankruptcy
Corporate bankruptcy may emerge as the result of two major category failures - business failure or financial hardship. Business failure comes from a critical flaw in the company's business model that prohibits it from generating the profit rate needed to justify its capital investment. Conversely, financial difficulties stem from a critical flaw in the way companies are financed, or their capital structure. Continued financial pressure leads to technical inadequacies (assets greater than liabilities, but companies can not meet current obligations) or "bankruptcy" (liabilities exceed assets, and companies have net negative wealth). Companies that experience business failures may remain bankrupt as long as they have access to funding; on the contrary, companies experiencing financial failure will be pushed into bankruptcy regardless of the health of their business model. The real cause of corporate bankruptcy is difficult to establish, due to the combined effects of external (macroeconomic, industrial) and internal (business or financial) factors. However, some research indicates that financial leverage and work-management mismanagement may be the two main causes of corporate failures and bankruptcies in the US.
The greatest bankruptcy
The biggest bankruptcy in US history took place on September 15, 2008, when Lehman Brothers Holdings Inc. filed for Chapter 11 protection with assets of more than $ 639 billion.
References
Further reading
External links
- United States Bankruptcy court information from uscourts.gov
- Link to federal bankruptcy court from uscourts.gov
- US court bankruptcy form from uscourts.gov
- Title 11 â € <â €
- Title 11 â € <â €
- US Bankruptcy Code and Rules of the American Bankruptcy Institute
- Bankruptcy Procedure Rules from law.cornell.edu
- Current Practice Rules and Procedures from uscourts.gov
- Title 11 â € <â €
Source of the article : Wikipedia
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