In addition, bankruptcy laws allow creditors to receive discharges, releasing them from accumulated debt. A creditor will no longer be required to pay all of his debts in full after court approval.
Bankruptcy law falls under the jurisdiction of federal law, specifically Title 11 of the United States Code. While the overall law must be followed, each state can enact laws that further direct the creditor-debtor claims procedure. The United States Bankruptcy Courts handle all proceedings related to bankruptcy claims. There are two types of bankruptcy procedures. The most popular option is Chapter 7, which requires liquidation. The appointment of a trustee to oversee the distribution of assets to creditors. Additionally, bankruptcy can be declared under Chapters 11, 12, and 13. These proceedings may be initiated voluntarily or by creditors. These Chapters provide a way for the debtor to repay his debts.
Once a bankruptcy petition has been filed, creditors will be required to wait to assert their claims within the scope of the ongoing proceedings. The debtor cannot transfer any assets involved in the proceeding. Any such transfers that were initiated prior to the proceedings will be voided or rendered invalid. Several provisions of the Bankruptcy Code enable creditors to establish priorities. Recent decisions, however, have held that Individual Retirement Accounts cannot be accessed in bankruptcy proceedings. This affords some protection to debtors who are already in dire financial straits.
Several revisions have been made to the guidelines for dismissals and conversions pertaining to proceedings in each of the chapters. The trustees' function has also been expanded to include additional oversight responsibilities.""
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