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Bankruptcy
Information
A
legally declared inability or impairment of ability of an
individual or organization to pay their creditors. A declared
state of bankruptcy can be requested by creditors in an effort
to recoup a portion of what they are owed; however, in the
overwhelming majority of cases, the bankruptcy is initiated
by the bankrupt individual or organization.
Purpose
The primary purpose of the laws of bankruptcy are: (1) to
give an honest debtor a "fresh start" in life by
relieving the debtor of most debts, and (2) to repay creditors
in an orderly manner to the extent that the debtor has property
available for payment.
Bankruptcy allows debtors to resolve debts through the division
of assets among creditors. Additionally the declaration of
bankrptcy allows debtors to be discharged of most of the financial
obligations, after their assets are distributed, even if their
debts have not been paid in full. During the pendency of a
bankruptcy proceeding, the "Debtor" is protected
from extra-Bankruptcy action by creditors by a legally imposed
"stay."
Bankruptcy in the United States
It is a matter placed under Federal jurisdiction by the United
States Constitution (in Article 1, Section 8), which allows
Congress to enact "uniform laws on the subject of Bankruptcy
throughout the United States." Its implementation, however,
is found in statute law. The relevant bankruptcie statutes
are incorporated within the Bankruptcy Code, located at Title
11 of the United States Code, and amplified by state law in
the many places where Federal law either fails to speak or
defers expressly to state bankruptcie law.
While bankruptcy cases are always filed in United States Bankruptcy
Court (an adjunct to the U.S. District Courts), bankruptcie
cases, particularly with respect to the validity of claims
and exemptions, are often highly dependent upon State law.
State law therefore plays a major role in many bankruptyc
cases, and it is often quite unwise to generalize bankrutpcy
issues across state lines, bankruptcies.
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This article is licensed under the GNU
Free Documentation License. It uses material from the
Wikipedia
article "Bankruptcy".
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