Bankruptcy and its English Origin.ppt

COPYRIGHT ? 2010 South-Western/Cengage Learning. Bankruptcy and its English Origin In early English law, those unable to pay their debts went to debtor’s prison. The goal of English bankruptcy law was to protect creditors. In response to England’s harsh treatment of debtors, American bankruptcy law has traditionally been lenient on debtors. Some think American bankruptcy law is TOO lenient and is often abused. Bankruptcy Abuse In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which makes the bankruptcy process more difficult. Before filing, individual debtors must now submit to credit counseling. If debtors earn more than their state’s median income, they must pay back some of their debt. Overview The Bankruptcy Code is divided into eight chapters. Chapters 1, 3, and 5 are administrative rules that apply to all types of bankruptcy proceedings. Chapters 7, 9, 11, 12, and 13 are substantive rules that apply to specific types of bankruptcies. These substantive chapters all have as their goal either rehabilitation or liquidation. Rehabilitation or Liquidation The objective of Chapters 11 and 13 of the Bankruptcy Code is rehabilitation of the debtor. When debtors are unable to develop a feasible plan for rehabilitation, Chapter 7 allows for liquidation (also known as straight bankruptcy). Chapters 9 and 12 are for specialized types of debtors and are not covered in this textbook. Goals The Bankruptcy Code has three primary goals: To preserve as much of the debtor’s property as possible. To divide the debtor’s assets fairly between the debtor and the creditors. To divide the debtor’s assets fairly among the creditors. Chapter 7 -- Liquidation Filing a Petition Any individual, partnership, corporation, or other business organization that lives, conducts business, or owns property in the United States can file under the Code. Petitions may be voluntary or involuntary. Ch. 7 -- Voluntary Petition May be filed by any deb