Bankruptcy Definition – What Does It Mean?
According to the official United States courts online glossary, (that you can view here) bankruptcy is defined as: “a legal procedure for dealing with debt problems of individuals and businesses; specifically, a case filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code).” What does that mean in layman’s terms? Let’s go through it here together:
Bankruptcy Definition – A Legal Procedure
This means that the process of filing bankruptcy is required to be done in a United States court of law and overseen by an appointed US bankruptcy trustee. Anyone who tells you that a bankruptcy can be filed outside of a US courtroom is incorrect.
This does not, however, mean that all bankruptcies require the aid of a licensed attorney; it is possible to file a bankruptcy “pro se” or on your own. Nevertheless, the hiring of a bankruptcy lawyer is highly recommended due to the amount of law involved, the many forms required, and the complex calculations involved with larger cases.
For Dealing with Debt Problems
This is without a doubt the main object of any bankruptcy, no matter which chapter it is. All bankruptcies have the same common goal: to eliminate or reduce problem debt. Note that the definition doesn’t define what types of debt are allowed to be eliminated by a bankruptcy – the actual law does this.
Of Individuals and Businesses
This part of the definition outlines who is allowed to be involved in the filing of a bankruptcy. There are different Chapters associated with personal and business bankruptcies.
The most common types of personal bankruptcy are Chapter 7 and Chapter 13 while the most common business bankruptcy is Chapter 11. The type of personal bankruptcy filed by most Americans each year is Chapter 7 bankruptcy.
Specifically, a case filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code) – This part of the definition lists the exact law that governs bankruptcy: title 11 of the US Code. This part of the US code is commonly referred to as the “bankruptcy code” and has been revised several times since its initial creation.
The most recent revision to the bankruptcy code was in 2005 with the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act which was put in place to make the abuse of bankruptcy less likely.
This may seem like an extremely simple way to describe an incredibly complex system of rules and laws, but starting with a simple definition will help put the ultimate goal of the bankruptcy process in perspective for you.
Yes, there is a lot to learn and that can be done, but it’s important to know that the option of bankruptcy exists when you are faced with an overwhelming amount of debt and do not know where to turn. Talk to a bankruptcy attorney in your area if you think this legal process could be of benefit to you.