The code contains federal laws as well as provisions regarding bankruptcy and has been continually amended. The most recent changes were enacted through the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 or BAPCPA giving say to a means test to protect creditors and ensure that debtors are fit to file for bankruptcy.
The Bankruptcy Code of the United States is divided into nine chapters dealing with general provisions, case administrations, the creditors, debtors, and the estate, liquidation, adjustment of debts, reorganization, as well as other cross-border cases.
Using the Bankruptcy Code
With the help of the Bankruptcy Code, people involved in bankruptcy are given the chance to reduce or totally eliminate their debts or be given a chance to repay the debts over time through a monthly payment plan. The laws designated by the code allow individuals and organizations alike to pay their debts securely and use assets and personal properties as collateral when necessary.
Understanding the Code’s Chapters
The Bankruptcy code is neatly divided into nine chapters: the first three which are comprised of Chapters 1, 3, and 5 deals with the general provisions with regards to bankruptcy rules and procedures. Chapters 7, 9, 11, 12, and 13 talk about the five varieties of bankruptcy while the last chapter; 15 involves bankruptcy filings of parties coming from cross-borders or more than one country.
Varieties of Bankruptcy
According to the code, bankruptcy comes in five varieties as explained in Chapters 7, 9, 11, 12, and 13. Among these varieties, Chapters 7 and 13 are the most popular among consumers. But to give you an idea, here is a brief description of what kind of bankruptcy variety each chapter covers.
Chapter 7 – this chapter allows the cancellation of unsecured debts like personal debts and/or credit card loans. Corporations and businesses under debt are also eligible to file for a Chapter 7 bankruptcy. However, with the new and strict stipulation of means test from the amended BAPCPA of 2005, individuals and organizations have to meet specific income requirements for eligibility.
Chapter 9 – this chapter deals mostly with bankruptcy involving local entities like school districts and county-owned hospitals. Thus, neither individuals nor organizations can file for bankruptcy under this chapter.
Chapter 11 – among all the chapters in the Bankruptcy Code, this chapter is so far the most comprehensive. It discusses in detail a wide variety of options on how you can reorganize your debts by way of debt repayment, debt cancellation, or debt restructuring, among others. However, the expensive filing fees as well as high administrative costs make filing for Chapters 7 and 13 more sensible and cost effective for most individual and corporations.
Chapter 12 – this chapter deals solely with providing restructured debts for family farmers with almost the same characteristics found in Chapter 13.
Chapter 13 – this chapter allows discharging and repaying debts for a period of 3 to 5 years. Filing for a Chapter 13 bankruptcy gives you the options to reduce the principal amount you owe in debts, come up with repayment plant that cannot be discharge, or totally eliminate the debts.
With the use of the Bankruptcy Code, you will be able to file for bankruptcy following the necessary federal laws and regulations without the fatal consequence of misinformation. If you don’t want to take such a risk, hiring a licensed bankruptcy lawyer would be a good option to take.