Bankruptcy

The US Constitution granted to Congress the duty to make laws regarding bankruptcy. The basic theory is a social responsibility. There are three or so reasons to be in bankruptcy court.

First, of course, is where a person (or company) files for bankruptcy attempting to protect what assets remain before creditors can take away those assets through judicial execution. In other words, give the debtor a "fresh start." Many debts can be discharged meaning the creditor gets nothing.

Second, there are creditors, who for the most part, want to get paid. They file proof of claims against the debtor. Depending on the type of debt owed, and whether that claim is secured by collateral, determines whether that creditor will get any or most of their money. For example, one may not discharge a mortgage on a house and keep the house as usually. However, credit card debt is not secured by collateral and usually the credit card company loses.

Anyway, the familiar forms of bankruptcy are called chapter 7, chapter 11 or chapter 13 and that means liquidation, re-organization and pay out plan respectfully.

There are a number of debts that are not dischargeable. For example, real property taxes may not be discharged, nor may one discharge, 940 and 941 taxes, customs duties, state and property taxes, child support, community property divisions, intentional and malicious judgments.

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