Bankruptcy is a legal declaration and process by an individual or organization that establishes that a debtor is unable to pay part or all of a debt to a creditor, and a federal court determines the outcome. This is called a “voluntary bankruptcy.”

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“Involuntary Bankruptcy” is similar, but is a petition by a creditor to recoup a portion of a debtor’s obligation, or restructure the existing debt.The majority of bankruptcies are voluntary.  Generally speaking, bankruptcy involves the processing of a federal court petition to govern over the liquidation or reorganization of personal or business assets to accomplish several things. One may be the payback of some of a debt owed to the creditor. Another may be to establish a payment plan. And often there is a discharge of a large portion of the debt.

Bankruptcy law, as it applies to United States citizens today, was established through a series of changes and adaptations that started with English law in the mid 1500’s. With the ratification of the U.S. Constitution in 1789, bankruptcy became recognized in the U.S. The Bankruptcy Reform Act of 1978, commonly called “The Bankruptcy Code,” featured a major overhaul to the laws pertaining to bankruptcy, and is the backbone of bankruptcy law as it pertains to U.S. citizens.

Although the primary laws regarding bankruptcy are established in the Bankruptcy Code so that there is consistency with national law, from state-to-state there are minor differences regarding what a debtor may keep, or what are referred to as “exemptions.” The most common types of bankruptcy are referred to by their Code assignments – Chapter 7, Chapter 11, and Chapter 13. Each of these involves different aspects of bankruptcy law as it pertains to personal and business issues, and variations of bankruptcy.

One of the most important aspects of Bankruptcy is that it provides an opportunity for a debtor to get a “fresh start” by liquidating assets to pay creditors or establishing a payment plan. The process also addresses fairness and priority among creditors. The Bankruptcy Code provides protection for the consumer, and protection against bankruptcy abuse. Its regulations guide all parties involved toward as fair a solution as possible.

If you are facing the possibility of bankruptcy, you must consider a number of issues and law requirements. Choose a legal counselor who is well-versed in bankruptcy law, and fluent in the plethora of state and federal aspects that pertain to your situation. Being one of her specialties, Tina Chen’s expertise in bankruptcy law will have a profound effect in determining the outcome of your case. Call her for a free consultation today.