Just about from its earliest inception, our nation has believed in new beginnings and fresh starts. People from other countries that had suffered defeats, financial reversals, of been precluded from opportunities, came to the United States for fresh starts.
An important component in giving people a fresh start is our Bankruptcy Courts. Sometimes people find themselves in a position where they cannot repay their debt and this interferes with their ability to maintain their business, retain their personal property and even homes, and continue with their lives in a normal fashion. Bankruptcy Courts are federal courts and are part of United States District Courts. As such, they exist all over the country in every federal district.
Bankruptcy allows people and businesses to obtain relief from debt. Congress passes the laws that control bankruptcy. The United States Supreme Court has described bankruptcy in these words. "[I]t gives to the honest but unfortunate debtor ... new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt." Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934). Creditors, those that have made loans to the individual or business or extended credit, are also protected under bankruptcy law.
The principal foundations of bankruptcy are (1) full disclosure, (2) breathing space, (3) notice, (4) maximization of value, (5) equality of distributions, and (6) a fresh start. The United States Supreme Court explained the purpose of bankruptcy: Debtors who seek bankruptcy protection must fully disclose their assets and liabilities, as well as income and expenses, and in return they receive breathing space from collection efforts. Creditors are treated fairly in distribution of any property that is available for liquidation. At the end of a bankruptcy case, the individual debtor receives a fresh start by the discharge (or elimination) of debt.
There are several types of bankruptcy. Two of the types are Chapter 7 and Chapter 13. The most common type of bankruptcy is Chapter 7, which is so named because it is found in Chapter 7 of the Bankruptcy Code. A Chapter 7 bankruptcy is a proceeding which will probably result in the discharge (or elimination) of debts without the necessity of paying any money to any of unsecured creditors or losing any property.
A second type of bankruptcy is known as a Chapter 13, which is a bankruptcy option for individuals with a regular income, whether from wages, government benefits, or otherwise. Under this type of bankruptcy, the debtor develops a plan to make monthly payments on his or her debts, over a three- to five-year period. The amount of the monthly payments depends on the amount of monthly disposable income and the nature of the debts. At the conclusion of this period, the debtor is discharged from liability for any unsecured debts and hopefully is no longer delinquent on any secured debts.
For more detailed information about the Chapters of bankruptcy, visit the United States Courts website on Bankruptcy Basics. For information about the Bankruptcy Court in the Eastern District of Tennessee, visit the Court's website.
Other helpful resources include:
Financial Literacy Program: Credit Abuse Resistance Education (CARE) (to schedule a CARE presentation for your school or community group, email CAREinTNE@gmail.com
National Conference of Bankruptcy Judges Public Outreach Webpage
For information about the quarterly Pro Bono Debt Relief Clinics in Knoxville sponsored by Legal Aid of East Tennessee, the Knoxville Bar Association, and the United States Bankruptcy Court for the Eastern District of Tennessee, contact LAET at 865-637-0484 or visit their website at www.LAET.org.
