The Law and its language
Bankruptcy in the
United States seeks to benefit both debtors and
creditors by seeing that debtors get relief from debts
they can't pay, and that creditors get paid from
whatever assets the debtor does not need to live going
Bankruptcy is governed by the federal law found in Title
11 of the United States Code. As federal law, it
supersedes any conflicting state law by reason of the
Supremacy Clause of the Constitution. With the exception
of exemptions, it is the same from state to state.
You can go to the
Glossary page in this site for an explanation of the
terms used in bankruptcy. When legal terms are used in
this site, they are linked to the Glossary: you can
click on the legal term and see a general definition of
There are four kinds of bankruptcy proceedings. They are
referred to by the chapter of the federal Bankruptcy
Code that describes them.
Chapter 7 is the most
common form of bankruptcy. It is a liquidation
proceeding in which the debtor's non-exempt assets, if
any, are sold by the Chapter 7 trustee and the proceeds
distributed to creditors according to the priorities
among creditors established in the Code.
Chapter 7 is available to individuals, married couples,
corporations and partnerships. Individual debtors get a
discharge within 4-6 months of filing the case.
If there are assets which are not exempt, the trustee
takes control of those assets, sells them and pays
creditors as much as the proceeds permit.
Any wages the debtor earns after the case is begun are
the debtor's; the creditors have no claim on those
Chapter 11 is a
reorganization proceeding, typically for corporations or
partnerships. Individuals, especially those whose debts
exceed the limits of Chapter 13, may file Chapter 11.
In Chapter 11, the debtor usually remains in possession
of his assets and continues to operate any business,
subject to the oversight of the court and the creditors
The debtor proposes a plan of reorganization which, upon
acceptance by a majority of the creditors, is confirmed
by the court and binds both the debtor and the creditors
to its terms of repayment. Plans can call for repayment
out of future profits, sales of some or all of the
assets, or a merger or recapitalization.
Chapter 12 is a
simplified reorganization for family farmers, modeled
after Chapter 13, where the debtor retains his property
and pays creditors out of future income.
Chapter 13 is a
repayment plan for individuals with regular income and
unsecured debt less than $307,675 and secured debt less
The debtor keeps his property and makes regular payments
to the Chapter 13 trustee out of future income to pay
creditors over time (3-5 years).
Repayment in Chapter 13 can range from 10% to 100%
depending on the debtor's income and the make up of the
Certain debts that cannot be discharged in Chapter 7 can
be discharged in Chapter 13. Chapter 13 also provides a
mechanism for individuals to prevent foreclosures and
repossessions, while catching up on their secured debts.
Call us or
McCallar Law Firm
West Oglethorpe Avenue
P.O. Box 9026
Savannah, Georgia 31412