Minnesota Bankruptcy: The Bankruptcy Code, the Bankruptcy Rules, the Bankruptcy Courts, and the Bankruptcy Trustee

BankruptcyA person or business files for bankruptcy in order to get back on top. The three main ways to do this are under Chapter 7, Chapter 11, and Chapter 13 of the Bankruptcy Code.

The Bankruptcy Code

Article I, Section 8, of the United States Constitution authorizes Congress to enact “uniform Laws on the subject of Bankruptcies.” Under this grant of authority, Congress enacted the “Bankruptcy Code” in 1978.

The Bankruptcy Code, which is codified as title 11 of the United States Code, has been amended several times since its enactment. It is the uniform federal law that governs all bankruptcy cases.

The Bankruptcy Rules

The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the “Bankruptcy Rules”) and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases.

The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses.

The Bankruptcy Courts

There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country. The bankruptcy courts generally have their own clerk’s offices.

The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts.

Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse.

The Bankruptcy Trustee

Chapter 7 of the Bankruptcy Code allows liquidation of the debtor’s non-exempt assets (many, if not all will be exempt and may not be taken or sold). The bankruptcy trustee is the one who takes the non-exempt assets of the debtor and sells them in order to liquidate them. The money from the sale is then given by the bankruptcy trustee to the creditors in order to satisfy at least part of the debt owed. The remainder of the debt, if permitted by law, is extinguished.

Chapter 11 of the Bankruptcy Code allows a debtor to reorganize in order to pay existing debts. The bankruptcy trustee is the one who facilitates the creation of a reorganization plan by working with the creditors involved.

Chapter 13 of the Bankruptcy Code allows a person who has regular, consistent income to repay debt according to a new, reorganized plan. The bankruptcy trustee is the one who oversees this process to ensure the debtor is making payments under the new schedule.

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