The Bankruptcy Code is a uniform federal law that administers bankruptcy cases and is used to provide debtors with a fresh financial position. The federal rules and regulations of each of the country’s bankruptcy courts, including the U.S. Bankruptcy Court for the Eastern and Western Districts of Arkansas, outline the formal procedures that handle individual debt issues.

There are six basic bankruptcy types, including Chapters 7, 9, 11, 12, 13 and 15. Each of these is used for a different situation. For example, Chapter 7 entails the liquidation of assets to pay off debt, while Chapter 13 allows individuals to reorganize their obligations pursuant to a court-approved plan. Bankruptcy court judges have the power to make decisions in matters related to bankruptcy cases, such as whether a discharge is awarded to the debtor. A discharge releases the debtor from the responsibility of paying the specified debts.

A lot of the bankruptcy filing process is conducted outside of court, so the debtor and judge have little involvement. For example, a person filing under Chapter 13 might only appear in front of a judge during a hearing to confirm a bankruptcy plan. The only official proceeding that most debtors may have to go to is a creditor meeting. Commonly held at the U.S. Trustee’s office, debtors are required to attend the meeting under Section 341 of the Bankruptcy Code so that the creditors have the opportunity to question them about their property and debts.

While Chapter 11 is available to some individual debtors, it is a more commonly used by businesses. Under Chapter 11, a judge may approve a plan that a business proposes to continue operating and pay its creditors over time by reorganizing its debts. A bankruptcy law attorney can discuss the various alternatives that may apply to a client’s set of circumstances.

Source: United States Courts, “Bankruptcy basics“, September 19, 2014