Bankruptcy is an ancient right. Medieval church law provided for the discharge of debt in exchange for the liquidation of all but one’s necessary assets. This led to the enactment of the first bankruptcy laws in merry old England. It was also a precursor to our modern Chapter 7 bankruptcy law. But even that advancement was not the first time laws provided for the discharge of debt. You can trace some form of liquidation law back more than 3,000 years to Ancient Babylon. The Code of Hammurabi, one of the oldest writings from the ancient world, provided for the enforcement and release of personal obligations.
In the United States, the condition of bankruptcy is as old as the nation itself, being an early part of the Constitution (Article 1, Section 8, Clause 4). Since that time, various statutes have been added and amended to organize the process, most recently in 2005. Today, every entity, from an individual person to a large corporation, may take advantage of this right to relief. This situation most often arises through no fault of the person or company – but because of unexpected economic hardship beyond their control.
There are four chapters under which a debtor may seek bankruptcy protection:
This is the type of relief most consumers seek. It’s a complete discharge of all unsecured debt, including credit cards and medical expenses. A case brought under this provision can be the simplest and quickest vehicle to a fresh start.
This chapter is attractive mostly to corporations seeking to rehabilitate a business. However, it is also designed to assist individuals with substantial assets to reorganize their affairs. This chapter should be approached with caution since its provisions are complex. Decisions thereunder are best approached with the assistance of competent counsel.
Chapter 12: Family Farmer or Fisherman
This section of the Code allows family farmers and fishermen to enter into a repayment plan similar to a Chapter 13 Wage Earner Plan.
This form of bankruptcy allows individuals with regular income to develop a repayment plan for all or some of their outstanding debt. It is especially attractive to Debtors wanting to hang onto major assets (e.g., a house or a car) that are in danger of foreclosure or repossession. There are also attractive features allowing for the recharacterizing of undersecured debt. For example, cramdowns on older vehicles and stripping of second mortgages.
Which of These Types of Bankruptcies Is Right for You?
To learn more about which of these types of bankruptcies best suits your situation, contact Benson Law Firm today.