Bankruptcy

===United States===
{{Main|Bankruptcy in the United States}}
[[File:Detroit, USA Taken From Windsor, Canada.jpg|thumb|right|In 2013, Detroit filed the [[Detroit bankruptcy|largest municipal bankruptcy case]] in U.S. history.]]
Bankruptcy in the United States is a matter placed under [[Law of the United States|federal jurisdiction]] by the [[United States Constitution]] (in Article 1, Section 8, Clause 4), which empowers [[United States Congress|Congress]] to enact "uniform Laws on the subject of Bankruptcies throughout the United States". Congress has enacted [[statutory law|statutes]] governing bankruptcy, primarily in the form of the Bankruptcy Code, located at Title 11 of the [[United States Code]].<ref>{{cite web|title=U.S. Code: Title 11 - Bankruptcy|url=https://www.law.cornell.edu/uscode/text/11|website=Legal Information Institute|publisher=Cornell Law School|access-date=19 October 2017|url-status=live|archive-url=https://web.archive.org/web/20170923215631/https://www.law.cornell.edu/uscode/text/11|archive-date=23 September 2017}}</ref>

A debtor declares bankruptcy to obtain relief from debt, and this is normally accomplished either through a discharge of the debt or through a restructuring of the debt. When a debtor files a voluntary petition, their bankruptcy case commences.<ref>{{cite web|title=11 U.S. Code § 301 - Voluntary cases|url=https://www.law.cornell.edu/uscode/text/11/301|website=Legal Information Institute|publisher=Cornell Law School|access-date=19 October 2017|url-status=live|archive-url=https://web.archive.org/web/20171019221326/https://www.law.cornell.edu/uscode/text/11/301|archive-date=19 October 2017}}</ref>

====Debts and exemptions====
While bankruptcy cases are always filed in [[United States Bankruptcy Court]] (an adjunct to the [[U.S. District Courts]]), bankruptcy cases, particularly with respect to the validity of claims and exemptions, are often dependent upon State law.<ref>{{cite web|title=11 U.S. Code § 522 - Exemptions|url=https://www.law.cornell.edu/uscode/text/11/522|website=Legal Information Institute|publisher=Cornell Law School|access-date=19 October 2017|url-status=live|archive-url=https://web.archive.org/web/20170809225102/https://www.law.cornell.edu/uscode/text/11/522|archive-date=9 August 2017}}</ref> A Bankruptcy Exemption defines the property a debtor may retain and preserve through bankruptcy. Certain real and personal property can be exempted on "Schedule C"<ref>{{cite web|url=http://www.uscourts.gov/uscourts/RulesAndPolicies/rules/BK_Forms_Official_2010/B_006C_0410.pdf |title=Schedule C- Property Claimed as Exempt |access-date=2014-03-08 |url-status=dead |archive-url=https://web.archive.org/web/20140610221416/http://www.uscourts.gov/uscourts/RulesAndPolicies/rules/BK_Forms_Official_2010/B_006C_0410.pdf |archive-date=2014-06-10 }}</ref> of a debtor's bankruptcy forms, and effectively be taken outside the debtor's bankruptcy estate. Bankruptcy exemptions are available only to individuals filing bankruptcy.<ref>{{cite web |url=http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Glossary.aspx |title=Bankruptcy Exemptions Available to Individuals |publisher=Uscourts.gov |access-date=2014-03-08 |url-status=live |archive-url=https://web.archive.org/web/20140310230239/http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Glossary.aspx |archive-date=2014-03-10 }}</ref>

There are two alternative systems that can be used to "exempt" property from a bankruptcy estate, federal exemptions<ref>{{cite web |url=https://www.law.cornell.edu/uscode/text/11/522 |title=Federal Bankruptcy Exemptions: 11 USC § 522 |publisher=Law.cornell.edu |access-date=2014-03-08 |url-status=live |archive-url=https://web.archive.org/web/20140226000317/http://www.law.cornell.edu/uscode/text/11/522 |archive-date=2014-02-26 }}</ref> (available in some states but not all), and state exemptions (which vary widely between states). For example, Maryland and Virginia, which are adjoining states, have different personal exemption amounts that cannot be seized for payment of debts. This amount is the first $6,000 in property or cash in Maryland,<ref>{{cite web|title=Code of Maryland, Sec. 11–504|url=http://mgaleg.maryland.gov/webmga/frmStatutesText.aspx?article=gcj&section=11-504&ext=html&session=2018RS&tab=subject5|website=General Assembly of Maryland|access-date=19 October 2017|url-status=live|archive-url=https://web.archive.org/web/20171019220929/http://mgaleg.maryland.gov/webmga/frmStatutesText.aspx?article=gcj&section=11-504&ext=html&session=2018RS&tab=subject5|archive-date=19 October 2017}}</ref> but normally only the first $5,000 in Virginia.<ref>{{cite web|title=Code of Virginia, Sec. 34-4. Exemption created.|url=https://law.lis.virginia.gov/vacode/title34/chapter2/section34-4/|website=Legislative Information System|publisher=Commonwealth of Virginia|access-date=19 October 2017|url-status=live|archive-url=https://web.archive.org/web/20171019221510/https://law.lis.virginia.gov/vacode/title34/chapter2/section34-4/|archive-date=19 October 2017}}</ref> State law therefore plays a major role in many bankruptcy cases, such that there may be significant differences in the outcome of a bankruptcy case depending upon the state in which it is filed.

After a bankruptcy petition is filed, the court schedules a hearing called a ''341 meeting'' or ''meeting of creditors'', at which the bankruptcy trustee and creditors review the petitioner's petition and supporting schedules, question the petitioner, and can challenge exemptions they believe are improper.<ref>{{cite web|title=What is a 341(a) Meeting of Creditors?|url=http://www.canb.uscourts.gov/faq/general-bankruptcy/what-341a-meeting-creditors|website=United States Bankruptcy Court, Northern District of California|publisher=United States Courts|access-date=14 May 2017|url-status=live|archive-url=https://web.archive.org/web/20170611070109/http://www.canb.uscourts.gov/faq/general-bankruptcy/what-341a-meeting-creditors|archive-date=11 June 2017}}</ref>

====Chapters====
There are six types of bankruptcy under the [[Title 11 of the United States Code|Bankruptcy Code]], located at Title 11 of the [[United States Code]]:
* [[Chapter 7, Title 11, United States Code|Chapter 7]]: basic liquidation for individuals and businesses; also known as straight bankruptcy; it is the simplest and quickest form of bankruptcy available
* [[Chapter 9, Title 11, United States Code|Chapter 9]]: municipal bankruptcy; a federal mechanism for the resolution of municipal debts
* [[Chapter 11, Title 11, United States Code|Chapter 11]]: rehabilitation or reorganization, used primarily by business debtors but sometimes by individuals with substantial debts and assets; known as corporate bankruptcy, it is a form of corporate financial reorganization that typically allows companies to continue to function while they follow debt repayment plans
* [[Chapter 12, Title 11, United States Code|Chapter 12]]: rehabilitation for family farmers and fishermen;
* [[Chapter 13, Title 11, United States Code|Chapter 13]]: rehabilitation with a payment plan for individuals with a regular source of income; enables individuals with regular income to develop a plan to repay all or part of their debts; also known as Wage Earner Bankruptcy
* [[Chapter 15, Title 11, United States Code|Chapter 15]]: ancillary and other international cases; provides a mechanism for dealing with bankruptcy debtors and helps foreign debtors clear debts

An important feature applicable to all types of bankruptcy filings is the [[automatic stay]].<ref>{{cite web|title=11 U.S. Code § 362 - Automatic stay|url=https://www.law.cornell.edu/uscode/text/11/362|website=Legal Information Institute|publisher=Cornell Law School|access-date=19 October 2017|url-status=live|archive-url=https://web.archive.org/web/20170827104847/https://www.law.cornell.edu/uscode/text/11/362|archive-date=27 August 2017}}</ref> The automatic stay means that the mere request for bankruptcy protection automatically halts most lawsuits, repossessions, foreclosures, evictions, garnishments, attachments, utility shut-offs, and debt collection activity.

The most common types of [[personal bankruptcy]] for individuals are Chapter 7 and Chapter 13. Chapter 7, known as a "straight bankruptcy", involves the discharge of certain debts without repayment. Chapter 13 involves a plan of repayment of debts over a period of years. Whether a person qualifies for Chapter 7 or Chapter 13 is in part determined by income.<ref name="C7Basics">{{cite web|title=Chapter 7 Basics|url=http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics|website=United States Courts|publisher=Administrative Office of the U.S. Courts|access-date=14 May 2017|url-status=live|archive-url=https://web.archive.org/web/20160629140922/http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics|archive-date=29 June 2016}}</ref><ref>{{cite web|title=Chapter 7 Means Test Calculation|url=http://www.uscourts.gov/sites/default/files/form_b_122a-2.pdf|website=United States Courts|publisher=Administrative Office of the U.S. Courts|access-date=14 May 2017|url-status=live|archive-url=https://web.archive.org/web/20170501105632/http://www.uscourts.gov/sites/default/files/form_b_122a-2.pdf|archive-date=1 May 2017}}</ref> As many as 65% of all US consumer bankruptcy filings are Chapter 7 cases.

Before a consumer may obtain bankruptcy relief under either Chapter 7 or Chapter 13, the debtor is to undertake [[credit counseling]] with approved counseling agencies prior to filing a bankruptcy petition and to undertake education in personal financial management from approved agencies prior to being granted a discharge of debts under either Chapter 7 or Chapter 13. Some studies of the operation of the credit counseling requirement suggest that it provides little benefit to debtors who receive the counseling because the only realistic option for many is to seek relief under the Bankruptcy Code.<ref>Jones, Yvonne D. (2007). "Bankruptcy Reform: Value of Credit Counseling Requirement Is Not Clear (GAO-07-203)". Washington, D.C.: Government Accountability Office. p. (Highlights). {{LCCN|2007414394}}. {{OCLC|156274430}}.</ref>

Corporations and other business forms normally file under Chapters 7 or 11.

=====Chapter 7=====
{{main|Chapter 7, Title 11, United States Code}}
Often called "straight bankruptcy" or "simple bankruptcy", a Chapter 7 bankruptcy potentially allows debtors to eliminate most or all of their debts over a period of as little as three or four months. In a typical consumer bankruptcy, the only debts that survive a Chapter 7 are [[student loan]]s, [[child support]] obligations, some tax bills, and criminal fines. Credit cards, pay day loans, personal loans, medical bills, and just about all other bills are discharged.

In Chapter 7, a debtor surrenders non-exempt property to a bankruptcy trustee, who then liquidates the property and distributes the proceeds to the debtor's unsecured creditors. In exchange, the debtor is entitled to a discharge of some debt. However, the debtor is not granted a discharge if guilty of certain types of inappropriate behavior (e.g., concealing records relating to financial condition) and certain debts (e.g., spousal and child support and most student loans). Some taxes are not discharged even though the debtor is generally discharged from debt. Many individuals in financial distress own only exempt property (e.g., clothes, household goods, an older car, or the tools of their trade or profession) and do not have to surrender any property to the trustee.<ref name="C7Basics"/> The amount of property that a debtor may exempt varies from state to state (as noted above, Virginia and Maryland have a $1,000 difference.) Chapter 7 relief is available only once in any eight-year period. Generally, the rights of secured creditors to their collateral continues, even though their debt is discharged. For example, absent some arrangement by a debtor to surrender a car or "reaffirm" a debt, the creditor with a [[security interest]] in the debtor's car may repossess the car even if the debt to the creditor is discharged.

Ninety-one percent of US individuals who petition for relief under Chapter 7 hire an attorney to file their petitions.<ref name="uscourts.gov">{{cite web|url=http://www.uscourts.gov/uscourts/Statistics/BankruptcyStatistics/BAPCPA/2013/Tables2A-2X.pdf |title=BAPCPA Table 2A. U.S. Bankruptcy Courts – Income and Expenses Reported by Individual Debtors in Chapter 7 Cases With Predominantly Nonbusiness Debts Commenced During the 12-Month Period Ending December 31, 2013, as Required by 28 U.S.C. 159(c) |access-date=2014-12-15 |url-status=dead |archive-url=https://web.archive.org/web/20141215234421/http://www.uscourts.gov/uscourts/Statistics/BankruptcyStatistics/BAPCPA/2013/Tables2A-2X.pdf |archive-date=2014-12-15 }}</ref> The typical cost of an attorney is $1,170.00.<ref name="uscourts.gov"/> Alternatives to filing with an attorney are: filing pro se,<ref>{{cite web|url=http://www.uscourts.gov/FormsAndFees/Forms/BankruptcyForms.aspx|title=Bankruptcy Forms|website=uscourts.gov|access-date=7 May 2018|url-status=live|archive-url=https://web.archive.org/web/20150505070637/http://www.uscourts.gov/FormsAndFees/Forms/BankruptcyForms.aspx|archive-date=5 May 2015}}</ref> hiring a non-lawyer petition preparer,<ref>{{cite news|title=Preparing Petitions: It Irks the Lawyers, But Is It Lawyering?|author=Adam Liptak|url=https://www.nytimes.com/2002/08/13/us/preparing-petitions-it-irks-the-lawyers-but-is-it-lawyering.html|newspaper=The New York Times|date=August 13, 2002|url-status=live|archive-url=https://web.archive.org/web/20170624170126/http://www.nytimes.com/2002/08/13/us/preparing-petitions-it-irks-the-lawyers-but-is-it-lawyering.html|archive-date=June 24, 2017}}</ref> or using online software to generate the petition.

To be eligible to file a consumer bankruptcy under Chapter 7, a debtor must qualify under a statutory "means test".<ref>{{Cite news|url=http://pewlaw.com/bankruptcy/arizona-bankruptcy-means-test/|title=Arizona Bankruptcy Means Test - Pew Law Center|newspaper=Pew Law Center|language=en-US|access-date=2017-01-08|url-status=live|archive-url=https://web.archive.org/web/20170108190251/http://pewlaw.com/bankruptcy/arizona-bankruptcy-means-test/|archive-date=2017-01-08}}</ref> The means test was intended to make it more difficult for a significant number of financially distressed individual debtors whose debts are primarily consumer debts to qualify for relief under Chapter 7 of the Bankruptcy Code. The "means test" is employed in cases where an individual with primarily consumer debts has more than the average annual income for a household of equivalent size, computed over a 180-day period prior to filing. If the individual must "take" the "means test", their average monthly income over this 180-day period is reduced by a series of allowances for living expenses and secured debt payments in a very complex calculation that may or may not accurately reflect that individual's actual monthly budget. If the results of the means test show no disposable income (or in some cases a very small amount) then the individual qualifies for Chapter 7 relief. An individual who fails the means test will have their Chapter 7 case dismissed, or may have to convert the case to a Chapter 13 bankruptcy.

If a debtor does not qualify for relief under Chapter 7 of the Bankruptcy Code, either because of the Means Test or because Chapter 7 does not provide a permanent solution to delinquent payments for secured debts, such as mortgages or vehicle loans, the debtor may still seek relief under Chapter 13 of the Code.

Generally, a trustee sells most of the debtor's assets to pay off creditors. However, certain debtor assets will be protected to some extent by bankruptcy exemptions. These include Social Security payments, unemployment compensation, limited equity in a home, car, or truck, household goods and appliances, trade tools, and books. However, these exemptions vary from state to state.

=====Chapter 11=====
{{main|Chapter 11, Title 11, United States Code}}
In Chapter 11 bankruptcy, the debtor retains ownership and control of assets and is re-termed a [[debtor in possession]] (DIP).<ref>{{cite web|title=11 U.S. Code § 1101 - Definitions for this chapter|url=https://www.law.cornell.edu/uscode/text/11/1101|website=Legal Information Institute|publisher=Cornell Law School|access-date=19 October 2017|url-status=live|archive-url=https://web.archive.org/web/20171019221324/https://www.law.cornell.edu/uscode/text/11/1101|archive-date=19 October 2017}}</ref> The debtor in possession runs the day-to-day operations of the business while creditors and the debtor work with the Bankruptcy Court in order to negotiate and complete a plan. Upon meeting certain requirements (e.g., fairness among creditors, priority of certain creditors) creditors are permitted to vote on the proposed plan.<ref>{{cite web|title=11 U.S. Code § 1126 - Acceptance of plan|url=https://www.law.cornell.edu/uscode/text/11/1126|website=Legal Information Institute|publisher=Cornell Law School|access-date=19 October 2017|url-status=live|archive-url=https://web.archive.org/web/20171019220225/https://www.law.cornell.edu/uscode/text/11/1126|archive-date=19 October 2017}}</ref> If a plan is confirmed, the debtor continues to operate and pay debts under the terms of the confirmed plan. If a specified majority of creditors do not vote to confirm a plan, additional requirements may be imposed by the court in order to confirm the plan. Debtors filing for Chapter 11 protection a second time are known informally as "Chapter 22" filers.<ref>{{Cite news|url=https://www.wsj.com/articles/SB10001424052970204124204577151211961572458|title=Twinkies Maker Preparing for Chapter 11 Filing|work=The Wall Street Journal|date=January 10, 2012|first1=Mike|last1=Spector|first2=Julie|last2=Jargon|url-status=live|archive-url=https://web.archive.org/web/20170709060131/https://www.wsj.com/articles/SB10001424052970204124204577151211961572458|archive-date=July 9, 2017}}</ref>

In a corporate or business bankruptcy, an indebted company is typically recapitalized so that it emerges from bankruptcy with more equity and less debt, with potential for dispute over the valuation of the reorganized business.<ref>{{cite journal |last1=Dick |first1=Diane |title=Valuation in Chapter 11 Bankruptcy: The Dangers of an Implicit Market Test Market Test |journal=University of Illinois Law Review |date=2017 |volume=2017 |issue=4 |page=1487 |url=https://digitalcommons.law.seattleu.edu/cgi/viewcontent.cgi?article=1762&context=faculty |access-date=5 November 2020 |archive-date=21 March 2020 |archive-url=https://web.archive.org/web/20200321062248/https://digitalcommons.law.seattleu.edu/cgi/viewcontent.cgi?article=1762&context=faculty |url-status=live }}</ref>

=====Chapter 13=====
{{main|Chapter 13, Title 11, United States Code}}
In Chapter 13, debtors retain ownership and possession of all their assets but must devote some portion of future income to repaying creditors, generally over three to five years.<ref name="ABA">{{cite web|title=Chapter 13 Bankruptcy|url=https://www.americanbar.org/groups/public_education/resources/law_issues_for_consumers/bankruptcy13_whatis/|website=American Bar Association|access-date=14 December 2020|date=11 April 2012|archive-date=5 December 2020|archive-url=https://web.archive.org/web/20201205085911/https://www.americanbar.org/groups/public_education/resources/law_issues_for_consumers/bankruptcy13_whatis/|url-status=live}}</ref> The amount of payment and period of the repayment plan depend upon a variety of factors, including the value of the debtor's property and the amount of a debtor's income and expenses.<ref name="bbasics">{{cite web|title=Chapter 13 - Bankruptcy Basics|url=http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics|website=United States Courts|access-date=19 October 2017|url-status=live|archive-url=https://web.archive.org/web/20171020210719/http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics|archive-date=20 October 2017}}</ref> Under this chapter, the debtor can propose a repayment plan in which to pay creditors over three to five years. If the monthly income is less than the state's median income, the plan is for three years, unless the court finds "just cause" to extend the plan for a longer period. If the debtor's monthly income is greater than the median income for individuals in the debtor's state, the plan must generally be for five years. A plan cannot exceed the five-year limit.<ref name="bbasics"/>

Relief under Chapter 13 is available only to individuals with regular income whose debts do not exceed prescribed limits.<ref>{{cite web|title=11 U.S. Code § 109 - Who may be a debtor|url=https://www.law.cornell.edu/uscode/text/11/109|website=Legal Information Institute|publisher=Cornell Law School|access-date=19 October 2017|url-status=live|archive-url=https://web.archive.org/web/20171019220224/https://www.law.cornell.edu/uscode/text/11/109|archive-date=19 October 2017}}</ref> If the debtor is an individual or a sole proprietor, the debtor is allowed to file for a Chapter 13 bankruptcy to repay all or part of the debts. Secured creditors may be entitled to greater payment than unsecured creditors.<ref>{{Citation | title = Bankruptcy Basics: Secured vs. Unsecured Claims | magazine = The National Law Review | date = 29 April 2021 | url = https://www.natlawreview.com/article/bankruptcy-basics-secured-vs-unsecured-claims | access-date = 26 October 2021 | archive-date = 26 October 2021 | archive-url = https://web.archive.org/web/20211026143553/https://www.natlawreview.com/article/bankruptcy-basics-secured-vs-unsecured-claims | url-status = live }}</ref>

In contrast to Chapter 7, the debtor in Chapter 13 may keep all property, whether or not exempt. If the plan appears feasible and if the debtor complies with all the other requirements, the bankruptcy court typically confirms the plan and the debtor and creditors are bound by its terms. Creditors have no say in the formulation of the plan, other than to object to it, if appropriate, on the grounds that it does not comply with one of the Code's statutory requirements.<ref>{{cite web|title=Federal Rules of Bankruptcy Procedure, Rule 3015. Filing, Objection to Confirmation, and Modification of a Plan in a Chapter 12 Family Farmer's Debt Adjustment or a Chapter 13 Individual's Debt Adjustment Case|url=https://www.law.cornell.edu/rules/frbp/rule_3015|website=Legal Information Institute|date=30 November 2011|publisher=Cornell Law School|access-date=19 October 2017|url-status=live|archive-url=https://web.archive.org/web/20171019220941/https://www.law.cornell.edu/rules/frbp/rule_3015|archive-date=19 October 2017}}</ref> Generally, the debtor makes payments to a trustee who disburses the funds in accordance with the terms of the confirmed plan.

When the debtor completes payments pursuant to the terms of the plan, the court formally grant the debtor a discharge of the debts provided for in the plan.<ref name="bbasics"/> However, if the debtor fails to make the agreed upon payments or fails to seek or gain court approval of a modified plan, a bankruptcy court will normally dismiss the case on the motion of the trustee.<ref>{{cite web|title=Federal Rules of Bankruptcy Procedure, Rule 1017. Dismissal or Conversion of Case; Suspension|url=https://www.law.cornell.edu/rules/frbp/rule_1017|website=Legal Information Institute|date=30 November 2011|publisher=Cornell Law School|access-date=19 October 2017|url-status=live|archive-url=https://web.archive.org/web/20171020032229/https://www.law.cornell.edu/rules/frbp/rule_1017|archive-date=20 October 2017}}</ref> After a dismissal, creditors may resume pursuit of state law remedies to recover the unpaid debt.
Description	What you type	What you get
Italic	''Italic text''	Italic text
Bold	'''Bold text'''	Bold text
Bold & italic	'''''Bold & italic text'''''	*Bold & italic text*
Description	What you type	What you get
Reference	Page text.<ref>[https://www.example.org/ Link text], additional text.</ref>	Page text.^[1]
Named reference	Page text.<ref name="test">[https://www.example.org/ Link text]</ref>	Page text.^[2]
Additional use of the same reference	Page text.<ref name="test" />	Page text.^[2]
Display references	<references />	↑ Link text, additional text. ↑ Link text