U.S. Bankruptcy - Overview


Bankruptcy in the United States is a set of federal laws governing the reorganization of businesses or the liquidation of assets of businesses or individuals for the benefit of creditors with any residual value being returned to the owners of the business or to the individual debtors. These laws are codified in various places in the U.S. Code Annotated (―USCA‖) with the vast majority contained in Title 11 (hereinafter the ―Bankruptcy Code‖). Procedural laws and rules are found in Title 28 and the procedural rules promulgated thereunder (the ―Federal Rules of Bankruptcy Procedure‖or more simply the ―Bankruptcy Rules‖). Specialized provisions relating to bankruptcy are contained in the Tax, Securities, Banking, and Criminal Codes, among others, but the overwhelming majority of ―bankruptcy law is contained in the Bankruptcy Code, the Bankruptcy Rules, and the relevant case law.

What follows is a very general discussion of the major aspects of U.S. bankruptcy. It is a well developed and complicated area of the law. It also tends to be fact specific and, unfortunately, except for those issues which have been interpreted by the U.S. Supreme Court, certain legal issues can be dealt with inconsistently from one federal circuit to another, though such differences are rare. In short, specific problems call for careful analysis and are beyond the scope of this general overview

How to Commence a Bankruptcy Case

A voluntary bankruptcy case is commenced by filing an Original Petition with the bankruptcy court in the appropriate jurisdiction for the debtor. Once a petition in bankruptcy is filed, the case becomes a matter of federal jurisdiction and any state law winding up, liquidation, or receivership action is halted by operation of law in favor of the federal proceeding.

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