Term Paper: Gathered an Understanding

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[. . .] The legal place for the bankruptcy laws is contained in Title 11 of the United States Code. Congress passed this code under its constitutional right to establish and it allowed the laws to be added after the constitution was written and ratified. The United States government is in charge of the laws of bankruptcy and the states are not allowed to change those laws. Individual states are allowed to provide other laws regarding the debtor and the creditor but when it comes to a bankruptcy filing the federal statutes and laws take precedence over any state decisions.

Bankruptcy proceedings are supervised by and litigated in the United States Bankruptcy Courts. These courts are a part of the District Courts of The United States. The United States Trustees were established by Congress to handle many of the supervisory and administrative duties of bankruptcy proceedings. Proceedings in bankruptcy courts are governed by the Bankruptcy Rules, which were promulgated by the Supreme Court under the authority of Congress (bankruptcy: an overview (http://www.law.cornell.edu/topics/bankruptcy.html)."

TYPES OF BANKRUPTCY PROCEEDINGS

There are two basic ways that a person can file bankruptcy. It is all handled in a similar fashion but there are two different proceedings that are allowed. When one files under chapter seven it is called a liquidation. This type of bankruptcy is the most common type according to nation reports. I was not surprised to learn this and will be more detailed as to why when we are further into the study. The chapter seven calls for a trustee to be appointed and that trustee is charged with collecting the non-exempt property of the debtor. Exempt property and assets are those, which cannot be seized or negatively affected by the filing of the bankruptcy. There are very strict regulations about what does and does not fall under the exemption statutes of the bankruptcy. People are allowed to keep one vehicle for example for the purpose of being able to get back and forth to work. However, if they own several cars the bulk of them will be seized to offset the debts through a liquidation process.

Bankruptcy proceedings under Chapters 11, 12, and 13 involves the rehabilitation of the debtor to allow him or her to use future earnings to pay off creditors. Under Chapter 7, 12, 13, and some 11 proceedings, a trustee is appointed to supervise the assets of the debtor. A bankruptcy proceeding can either be entered into voluntarily by a debtor or initiated by creditors. After a bankruptcy proceeding is filed, creditors, for the most part, may not seek to collect their debts outside of the proceeding. The debtor is not allowed to transfer property that has been declared part of the estate subject to proceedings. Furthermore, certain pre-proceeding transfers of property, secured interests, and liens may be delayed or invalidated. Various provisions of the Bankruptcy Code also establish the priority of creditors' interests (bankruptcy: an overview (http://www.law.cornell.edu/topics/bankruptcy.html)." noticed during the learning process of this paper that there did not seem to be any set rules for what type of bankruptcy a person could file if they owned no real assets (Dugas, 1999). If the persons doing the filing did not own property they could choose to file a 13 or a seven. However, a person who has assets can be effectively blocked because the assets are worth to much for that person to be allowed to file a chapter seven proceedings. (Wilbert, 2002) The sour economy has caused a rise in the number of bankruptcy filings according to recent reports (bankruptcy: an overview (http://www.law.cornell.edu/topics/bankruptcy.html)." More than 4,000 individuals and businesses filed for bankruptcy in North Georgia last month - the largest amount ever. Nationally, in the second quarter, there were 400,700 filings, the biggest quarter in history. In the 12-month period ending in June, more than 1.5 million bankruptcies were filed, the most ever in a year's time (France, 2000). Though bankruptcies have been increasing for more than a decade, the economic downturn has exacerbated the problem during the past two years. Consumers are filing the majority of bankruptcies. "People are so stretched out, any kind of buffeting from any place is going to cause that economic house of cards to fall," said Milton Jones, a bankruptcy attorney who has seen the increases firsthand at his College Park office (bankruptcy: an overview (http://www.law.cornell.edu/topics/bankruptcy.html)." learned something that in retrospect I probably should have already known but did not. The consumer increase in bankruptcy filings is directly related to the consumer debts. Consumer debts have increased steadily for the last decade and this has a direct impact on the bankruptcy court flow according to bankruptcy and economic experts. This showed me the trend is that the bankruptcy filings are directly related to how the economy is doing. I realized how this works when I thought about credit. When the was doing fine the consumer was spending everything he or she had. They went out and got credit cared and ran them up to their limits. Why not they reasoned? They both had jobs, the kids were doing well and they had been promised raises and promotions I the future. When the economy began to take a down turn the jobs went stagnate and any were laid off. That promotion that was being counted on was not coming through yet the credit card were racking up interest. The people who had lived so well suddenly found themselves in financial straights with no way out. The economy continued its chokehold on the residents and the credit problems grew. The whole thing snowballed and people who used to work five days were cut back to four or three. People who used to have two family incomes were now a one family income due to a layoff. I discovered that many of my preconceived notions about what type of person files bankruptcy were wrong. People who had spent their lives paying their bills on time and being responsible were nothing more than victims of an economy they did not know was coming. They woke up one day and discovered that all of their hanging on abilities were exhausted and they were still hopelessly behind. They had used their savings, their kids college funds and borrowed from family and still the debts kept climbing. These people were often left no choice but to file bankruptcy and to try and start over. I had to let goof my earlier belief that these people were the dregs of society and accept the fact that bad things really do happen to good people and this may be one strong example. Another notion that I had before the study began was that the laws were designed to protect the consumer from having to do the right things. The reality is that the laws are designed to assist the consumer in starting over but not at the expense of the creditor if there are other options.

In the study of bankruptcy I discovered some surprising facts that I would not have guessed but now make perfect sense to me. One such fact is that women are the fastest growing group of bankruptcy filers in the nation. This makes sense from a purely logistical standpoint once I stopped and thought about it (Thompson, 1999). I realized that divorce statistics say women are often plunged into poverty when they get a divorce while the man's income usually improves. This statistic can easily cross over into the bankruptcy arena and explain why there are so many women filing compared to their male counterparts. "Women accounted for 39% of bankruptcy filings in the 12 months ending March 31, says bankruptcy expert and Harvard law professor Elizabeth Warren. Warren blames divorce for the trend. "If a woman is divorced, she is 300% more likely to file for bankruptcy," she says. Other experts cite the low incomes of many elderly women and their susceptibility to financial fraud. Warren released the data as Congress is considering a bill that would make it harder to file for Chapter 7 bankruptcy, which wipes out most debt including credit card debt. That would hit women doubly hard, consumer advocates say (Thompson, 1999).

Many women with a legitimate need for bankruptcy relief would have a harder time getting into the system and getting a fresh start," says Ellen Nissenbaum of the nonprofit Center on Budget and Policy Priorities (Thompson, 1999). "And many women would have a harder time collecting support payments" from husbands who can't get bankruptcy relief, she says. About 14% of bankruptcies list child support and alimony among their debts, Warren says (Thompson, 1999). "

In my studies I discovered an interesting fact. According to some studies it is difficult to determine the exact numbers of bankruptcies being filed each year. This didn't make sense to me at first since bankruptcy filings are… [END OF PREVIEW]

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