Cameron Miranda
The legislative branch, or Congress, makes bankruptcy laws in the United States. Bankruptcy is a legal process for relieving debt that the borrower cannot repay. It is a measure of last resort that typically requires liquidating assets or entering a repayment plan. Bankruptcy laws are contained in Title 11 of the U.S. Code, also known as the Bankruptcy Code. While Congress established the U.S. Trustee Program to oversee bankruptcy proceedings, bankruptcy courts have very limited jurisdiction. Bankruptcy judges are appointed to 14-year terms by the President with the advice and consent of the Senate.
| Characteristics | Values |
|---|---|
| Branch that makes bankruptcy laws | Congress |
| Branch that oversees bankruptcy proceedings | U.S. Trustee Program within the Department of Justice |
| Branch that appoints bankruptcy judges | The President with the advice and consent of the Senate |
| Branch that hears bankruptcy cases | Federal courts, bankruptcy courts, and state courts |
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What You'll Learn
Bankruptcy jurisdiction
In the United States, bankruptcy jurisdiction falls under federal law. Federal courts have exercised jurisdiction over bankruptcy proceedings and related cases since 1898. The federal courts have exclusive jurisdiction over all cases arising under bankruptcy laws.
The United States Bankruptcy Code (title 11, United States Code) and the Federal Rules of Bankruptcy Procedure govern bankruptcy cases and proceedings. The local rules of practice and procedure adopted by each bankruptcy court are available on their websites or in person at their clerk's office.
Bankruptcy judges are judicial officers of the district court who preside over bankruptcy cases and proceedings referred to them by the district courts. These judges are appointed to 14-year terms by the President, with the advice and consent of the Senate.
The district courts have original and exclusive jurisdiction over all cases under Title 11 of the United States Code, which encompasses bankruptcy law. This means that the district courts are the primary venues for bankruptcy proceedings and have the authority to hear and decide matters related to bankruptcy petitions and disputes.
Additionally, the district courts have original but not exclusive jurisdiction over civil proceedings arising under Title 11 or related to cases under Title 11. This allows for flexibility in certain bankruptcy-related matters, where other courts may have concurrent jurisdiction or where a case can be adjudicated in a state forum if it can be timely addressed.
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Bankruptcy petition
In the United States, bankruptcy laws are made by Congress, which has the power to establish uniform rules of bankruptcy procedure. The federal courts have exercised jurisdiction over bankruptcy proceedings and related cases since 1898. The bankruptcy process involves filing a petition with a bankruptcy court, which is the first of many forms that need to be completed. This can be done by an individual or a business entity, and it is recommended that a qualified bankruptcy attorney is consulted to help navigate the complex legal process.
The bankruptcy petition requires the filer to disclose their financial information, including income, assets, debts, and expenses. This information is used to determine whether the debtor must liquidate any assets or if a repayment plan can be established. The process provides a legal path to debt relief, but it also carries significant financial consequences, such as credit damage and the potential loss of assets.
There are different types of bankruptcy petitions, including voluntary and involuntary petitions. A voluntary petition is filed by the debtor themselves, while an involuntary petition is filed by a creditor or group of creditors forcing the debtor into bankruptcy. The most common type is a voluntary petition filed by an individual.
It is crucial to complete the bankruptcy paperwork transparently, as the debtor or their representative must sign the petition under penalty of perjury. Providing false information or concealing assets can result in fines, imprisonment, or both.
Once the bankruptcy petition is filed, an automatic stay takes effect, temporarily halting creditors from pursuing collection actions such as lawsuits, foreclosure, or wage garnishment. A trustee is appointed to oversee the case and determine the next steps, which could include the sale of assets or a repayment plan.
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Bankruptcy fraud
Petition mills are another type of bankruptcy fraud scheme on the rise. These pass themselves off as consulting services, claiming to help tenants facing financial difficulties avoid eviction. However, they file for bankruptcy in the tenant's name, dragging out the proceedings and charging exorbitant fees, leaving the tenant with no savings and a ruined credit score.
Other forms of bankruptcy fraud include false statements or omissions on bankruptcy petitions and schedules, fraudulent transfers of property, destruction or alteration of records, and withholding of information.
To report suspected bankruptcy fraud in the US, individuals can contact the U.S. Trustee Program of the Department of Justice via email or mail. Information required includes the name and case number of the bankruptcy case, a description of the alleged fraud, and any supporting documentation.
In terms of which branch can make bankruptcy laws, the federal courts in the United States have consistently exercised jurisdiction over bankruptcy proceedings and related cases since 1898. The Supreme Court and Congress also play a role in approving uniform rules of bankruptcy procedure. Bankruptcy judges have exclusive jurisdiction over all cases arising under bankruptcy laws and original jurisdiction over civil proceedings related to bankruptcy.
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Bankruptcy discharge
Bankruptcy is a legal process that relieves debtors of debts they cannot repay. It is a measure of last resort, as it typically requires liquidating assets or entering a repayment plan. The bankruptcy discharge varies depending on the type of case a debtor files: Chapter 7, 11, 12, or 13. A bankruptcy discharge releases the debtor from personal liability for certain types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged.
The timing of the discharge depends on the chapter under which the case is filed. In a Chapter 7 case, the discharge is typically entered within 75 days after the §341(a) meeting of creditors. In a Chapter 11 case, the discharge is entered once the debtor's Chapter 11 plan has been confirmed (except in an individual Chapter 11, where discharge is deferred until the debtor completes all plan payments). In Chapter 12 or 13 cases, the discharge is typically entered upon the completion of the debtor's plan payments.
It is important to note that not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. Congress has determined that these types of debts are not dischargeable for public policy reasons. Debts not subject to discharge typically include child support, alimony, and debts for injuries to a person or property, among others.
A discharge can be denied by the court for all debts or a particular debt. For a discharge to be denied as to all debts, the debtor must not be entitled to a discharge by law, or someone must file an Adversary Complaint with the court. To deny the dischargeability of a particular debt, the debt must be non-dischargeable by law, or someone must file an Adversary Complaint seeking to deny the dischargeability of that debt.
The bankruptcy discharge is a permanent injunction that prohibits creditors from attempting to collect discharged debts. Creditors are not permitted to contact or pursue debtors for outstanding debts after they have been discharged. The Federal Rules of Bankruptcy Procedure provide for the clerk of the bankruptcy court to mail a copy of the order of discharge to all creditors, the debtor, and their attorneys.
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Bankruptcy valuation
In the United States, bankruptcy laws are made by Congress, as Article I of the US Constitution grants Congress the power to create bankruptcy laws and bankruptcy courts. The federal courts have been exercising jurisdiction over bankruptcy proceedings and related cases since 1898.
When a company files for bankruptcy, its value is typically determined by a valuation expert. The first step in this process is determining the premise of value, which can be either the going-concern value or the liquidation value. The going-concern value assumes that the company will continue operations in the future, while the liquidation value is based on the assumption that the company is on its "death bed". The appropriate premise of value to use depends on the specific facts and circumstances of each case.
The second step in the bankruptcy valuation process is establishing the appropriate standard. This may involve using a value-in-exchange standard, such as fair market value, or a value-in-place standard, such as investment value. The choice of standard depends on the specific provisions of the Bankruptcy Code and related state law statutes.
The income approach, particularly the discounted cash flow method (DCF), can provide a more reliable estimate of value for a distressed company compared to the guideline approaches. It is important to note that the process of valuing a distressed company is complex and less understood than valuing a healthy company. Engaging a professional with experience and expertise in this domain can assist in navigating the complex bankruptcy valuation process and ensuring a reasonable and reliable valuation.
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Frequently asked questions
The legislative branch, or Congress, can make bankruptcy laws.
Bankruptcy is a legal process for relieving debt that the borrower cannot repay.
When you declare bankruptcy, you file a petition with a federal court. An automatic stay takes effect, temporarily halting creditors from pursuing collection actions against you, including lawsuits, foreclosure, or wage garnishment.
The United States Bankruptcy Code (title 11, United States Code) is available online and at your local law library.
The judicial branch, or the federal courts, have exercised jurisdiction over bankruptcy proceedings and related cases since 1898. The Supreme Court also plays a role in promulgating uniform rules of bankruptcy procedure.
