The word “Bankruptcy” has a few definitions in the dictionary. In its most basic form, it means not having enough money to pay one’s debts and living expenses. The word has its origins in the Latin term banca rotta, which means “broken bench” (signifying the insolvency of a moneylender). This Blog focuses on the legal process of Bankruptcy, which is administered by the United States Bankruptcy Courts. Bankruptcy is a federal, not state, procedure, although most states have some form of legal process to deal with insolvency. Bankruptcy has a long history in the United States, and the United States Constitution provides for the creation of Bankruptcy Courts. Bankruptcy Courts (in some form) began in the early 1800’s, and are now considered a unit of the United States District Court. In early years, Bankruptcy Judges were called “Commissioners” and “Referees.”
There are 94 judicial districts in the United States, including three in Georgia (the Northern, Middle and Southern Districts). In turn, each district may have Court locations in several “divisions.” For example, the Northern District of Georgia has its main Court and administrative offices in Atlanta, but also has courthouses in Newnan, Rome and Gainesville.
Bankruptcy law is found in Title 11 of the United States Code, and is divided into chapters. Some of the chapters are administrative or deal with the entire Bankruptcy system, and other chapters deal with specific types of Bankruptcy cases that can be filed. These chapters include the well-known Chapter 7, Chapter 13 and Chapter 11, and are discussed in greater detail in other posts.
The general goal of Bankruptcy, at least for individuals, is to get a “discharge” (or release) of some or all of their debt. It is often said that Bankruptcy is intended to provide a “fresh start” for the “honest but unfortunate debtor.” Debts normally discharged in Bankruptcy include credit card debt, personal loans, medical bills, personally guaranteed business debt, and even home loans when the individual chooses to surrender a house. Congress has determined that some types of debts should not be discharged. These include most taxes, student loans, alimony and child support and criminal fines. Other debts may be excluded from a discharge based on the conduct of the debtor. For example, if a person borrowed money or ran up credit card debt with the intention of filing for Bankruptcy, or embezzled money from an employer, the creditor may object to the discharge of that debt. In certain cases, a person may be completely denied a discharge for all debts. This most often occurs when the person has tried to hide assets from the Bankruptcy Court or has filed false documents with the Court, but can also occur when the person has received a recent discharge in a prior case.
Bankruptcy law, like most codes, is very complicated. The Code alone fills a large book with small print. Other laws that are applicable to Bankruptcy cases, including state law and other federal laws, fill volumes of books. Court cases interpreting Bankruptcy law fill libraries, and the United States Supreme Court and Courts of Appeals are regularly interpreting the Bankruptcy Code.
If you have read this far, and you believe Bankruptcy is even a possibility in the months ahead, please do yourself a favor and schedule a meeting with a good Bankruptcy lawyer in your area. Very few people will say that a good meeting with an experienced lawyer was a waste of time and virtually all lawyers will offer a free initial meeting. A person can spend hours reading this blog and other great Bankruptcy blogs, and will not get as much benefit as spending an hour with a lawyer reviewing their specific circumstances.