Bankruptcy Code
The Bankruptcy Code is an informal name for Title 11 of the United States Code (11 U.S.C. §§ 101-1330), which serves as the federal bankruptcy law. Currently there are several types of bankruptcies which are referred to by their respective chapters. All bankruptcies are filed in a federal court called the US Bankruptcy Court, which will supervise such cases to termination.
History
For over a dozen years after the ratification of the Constitution, Congress failed to adopt a single bankruptcy law.[1] It was not until April 4, 1800, that the Sixth Congress finally adopted our Nation's first bankruptcy law, ch. 19, 2 Stat. 19, a law that left plenty of room for state law, § 61, id., at 36.[2]
The first federal bankruptcy law was repealed by Congress just three years later.[3] A decade later, the U.S. Supreme Court confirmed that the Bankruptcy Clause does not vest exclusive power in Congress, but instead leaves an important role for the States.[4] It was not until 1841 that Congress enacted another bankruptcy law, ch. 9, 5 Stat. 440, and then repealed it less than two years later, ch. 82, id., at 614. The Civil War and the debts it caused led Congress to pass another bankruptcy law in 1867, ch. 176, 14 Stat. 517, but that was likewise repealed after just over a decade, ch. 160, 20 Stat. 99.
Bankruptcy Code Chapters
Chapter 7
A Chapter 7 bankruptcy provides for the total "liquidation" of the debtor's assets (the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors).
In order to be eligible for Chapter 7, the debtor must satisfy a means test, whereby the court will evaluate the debtor's income and expenses to determine if the debtor may proceed under Chapter 7.
Chapter 7 bankruptcies are most common in the business realm, whereby a business declares total insolvency and seeks to cease doing business forever.
Types of bankruptcies
References
- â See, e.g., 9 Annals of Congress 2671 (1799) (noting that Congress had "not ... passed [bankruptcy legislation] for these ten years past, and the States [have] legislated upon it in their own way" (statement of Rep. Baldwin)); 3 Farrand's Debates 380 (same).
- â In contrast, the very first Congress enacted other sweeping legislation including, inter alia, patent and copyright legislation. 1 Stat. 109, 124.
- â 2 Stat. 248.
- â See Sturges v. Crowninshield, 17 U.S. 122, 4 Wheat. 122, 4 L. Ed. 529 (1819).
Sources
- Cent. Va. Cmty. College v. Katz, 546 U.S. 356 (2006) (Thomas, J., dissenting)