Federal Bankruptcy Law

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uptcy, resolving creditors’ claims, and protecting debtors’ rights. Bankruptcy law is exclusively federal law; there are no state bankruptcy laws.
Bankruptcy judges decide core proceedings regarding bankruptcy cases and noncore proceedings concerning the debtor. Core proceedings are in areas such as allowing creditor claims, deciding preferences, and confirming plans of reorganization. Noncore proceedings are resolved in federal or state court and include areas such as decisions on personal injury, and divorce.
Chapter 7 Liquidation Bankruptcy
The most common form of bankruptcy is Chapter 7 liquidation bankruptcy. With this a debtor’s nonexempt property is sold for cash that is then distributed to creditors, discharging any unpaid debts. Individuals, partnerships and corporations may file a Chapter 7 proceeding. Banks, credit unions, and railroads are not permitted to file a Chapter 7.
Filing a petition. To commence a Chapter 7 proceeding a petition must be filed. This can be done voluntarily by the debtor, or involuntarily by a creditor. A voluntary petition simply needs to state the debtor has debts that exceed assets. Included must be a list of unsecured creditors and the amount owed to each, a list of all property owned, a statement of financial affairs, and a list of current income and expenses. Involuntary petitions cannot be filed against farmers, ranchers, or nonprofit organizations. An involuntary petition must allege that debts are not being paid, as they come due.
Meeting of creditors. Within 10 to 30 days the court must call a meeting of the creditors. The judge does not attend this meeting. Creditors may ask questions of the debtor concerning financial affairs, and possible concealment of assets. The debtor may have an attorney present.
Appointment of a trustee. A Chapter 7 proceeding must have a trustee appointed. An interim is appointed until the meeting of creditors where a permanent ...