Personal Bankruptcy Laws in the United States of America

Bankruptcy, a situation, in which a person is not able to pay off debts owed to creditors. It is a legal state, which can only be acquired by persons who are in debt, but are unable to get out of their debt situation. Petitions for bankruptcy can be filed by both corporations and individuals, either voluntarily or involuntarily. However, since most petitions are filed by individuals, it is crucial for us to examine the personal bankruptcy laws.

In the United States, bankruptcy is governed by title 11 of the United States Code. This title has a number of chapters, which deal with different procedures for filing bankruptcy. However, the chapters that are mostly referred to are 7, 11 and 13. This is because; petitions presented under these chapters, lead to the quick resolution if debt disputes.

Bankruptcy laws are governed by the federal laws. However, States have also been given the mandate to enact certain laws that relate to property that may be subjected to bankruptcy. Personal bankruptcy laws, therefore, relate to laws that regulate the adjudication of bankruptcy upon individual persons. These laws regulate bankruptcy right from filing to adjudication.

There are two types of personal bankruptcy laws in the United States, and these relate to chapters 7 and 13. Under chapter 7, the applicant’s debts are discharged after all or some of their assets are sold off. In other words, the debtor’s assets are sold off, and the proceeds of such sales are distributed among the creditors. However, relevant to note is that, the only assets that are supposed to be sold off are assets that are not exempt from sale. Assets that are exempt are those which are not subject to sale. Bank accounts held by the debtor are not exempt and can, therefore, be liquefied to settle the debts of the petitioner. Under chapter 7 of the bankruptcy code, after all non-exempt assets have been sold off and the proceeds distributed, any remaining debts are automatically discharged.

The second filing method recognized by the personal bankruptcy laws is the one under chapter 13 of the bankruptcy code. Under this chapter, the petitioner/debtor is given an opportunity to formulate a plan, under which he will be able to pay the debts after a given period. The period that is usually given is between three to five years. However, it is necessary to note that, upon filing for bankruptcy under this chapter, you are supposed to pay the creditors directly. At this point, you only pay them through the court. In other words, you submit the payments into court, and it is upon the court, to forward them to the creditors.

It is, pertinent to note that, before filing petitions under these two chapters, you need to prove that your income is not enough to pay off all your debts at the same time. Otherwise, all in all, personal bankruptcy laws usually relate to the filing of bankruptcy petitions under the above stated chapters of the bankruptcy code.