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I, Section 8, of the United States Constitution authorizes Congress to enact
"uniform Laws on the subject of Bankruptcies." Under this grant
of authority, Congress enacted the "Bankruptcy Code" in 1978.
The Code, which is codified as title 11 of the United States Code, has been
amended several times since its enactment. It is the uniform federal law
that governs all bankruptcy cases. The Federal Rules of Bankruptcy Procedure
(often called the "Bankruptcy Rules") and local rules of bankruptcy
govern the procedural aspects of the bankruptcy process.
Chapter 7
Chapter 7 of the United States Bankruptcy Code is the Bankruptcy Code's
"liquidation" chapter. Lawyers sometimes refer to it as a "straight
bankruptcy." It is used primarily by individuals who wish to free
themselves of debt simply and inexpensively, but may also be used by businesses
that wish to liquidate and terminate their business.
Chapter 11
A case filed under chapter 11 of the United States Bankruptcy Code is
frequently referred to as a "reorganization" bankruptcy. While
individuals are not precluded from using chapter 11, it is more typically
used to reorganize a business, which may be a corporation, sole proprietorship,
or partnership.
Chapter 13
Chapter 13 of the United States Bankruptcy Code is frequently referred
to as a "wage earner" chapter, although it is available to individuals
with regular income from any source, not just wages.
Chapter 12
Chapter 12 of the Bankruptcy Code was enacted by Congress in 1986, specifically
to meet the needs of financially distressed family farmers. The primary
purpose of this legislation was to give family farmers facing bankruptcy
a chance to reorganize their debts and keep their farms.
Chapter 9
In the more than 60 years since Congress established a federal mechanism
for the resolution of municipal debts, there have been fewer than 500
municipal bankruptcy petitions filed. Although chapter 9 cases are rare,
a filing by a large municipality can (like the 1994 filing by Orange County,
California) involve many millions of dollars in municipal debt.
This information should not be cited or relied
upon as legal authority. It should not be used as a substitute for reference
to the United States Bankruptcy Code (title 11, United States Code) and
the Federal Rules of Bankruptcy Procedure, both of which may be reviewed
at local law libraries, or to local rules of practice adopted by each
bankruptcy court. Finally, this information should not substitute for
the advice of competent legal counsel.
Source: Administrative
Office of US Courts, 2000.
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