In the United States, bankruptcy law offers a debtor, one who is unable to pay his creditors, a way to resolve his debts through the division of his assets among his creditors. This process allows the interests of all the creditors to be treated equally. Some bankruptcy procedures allow debtors to be discharged of all financial obligations even if creditors have not been fully paid. While other bankruptcy procedures allow a debtor to stay in business and use their revenue to pay off creditors over a period of time.
The United States Bankruptcy courts, which are District courts of the United States, are specifically designed to hear only bankruptcy cases. The United States Trustees, which was established by Congress, act as the administrator of bankruptcy proceedings. The Trustee reviews records and divide assets equally among the creditors. When filing for bankruptcy, there are different chapters one could file under. Filing for bankruptcy under Chapter 7 is a liquidation of your assets. Chapter 7 filing is the most common type of bankruptcy proceeding. In Chapter 7 proceedings, the Trustee collects properties and any other assets of the debtor, sells it and then distributes the proceeds to the creditors.
Other bankruptcy filings like Chapter 11, 12, and 13 involve creating a proposal for the debtor to use future earnings to pay off their creditors. In these proceedings, the Trustee is appointed to supervise the assets of the debtor.
There are two types of bankruptcy proceedings. A voluntary proceeding is when the filing is entered by the debtor. An involuntary proceeding is when a creditor forces the debtor into bankruptcy proceeding. When a bankruptcy proceeding is filed, all further litigation against the debtor is stayed and none of the creditors may seek out their debts outside of the bankruptcy proceeding. It is also worth noting that the debtors shall not be allowed to transfer property under these proceedings.
Our attorneys are experienced with representing both debtors filing for bankruptcy, as well as creditors in protecting their rights during bankruptcy proceedings. We are experienced in filing Adversary Proceedings as well as defenses to Preference Actions. Contact us today for a no obligation and free consultation.