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Bankruptcy law helps the people who can no longer pay their creditors get a chance to pay by liquidating assets or creating a repayment plan.

Bankruptcy law also has laws for troubled businesses and provides orderly distributions to business creditors through reorganization or liquidation. Most cases are filed under the three main chapters of the Bankruptcy Code – Chapter 7, Chapter 11, and Chapter 13.

A bankruptcy case cannot be filed in a state court because Federal courts have exclusive jurisdiction over bankruptcy cases.

Process of filing bankruptcy:-

  • A filing a bankruptcy case normally begins with the debtor filing a petition with the bankruptcy court, which may be filed by an individual, by a couple (husband and wife together), or else by a corporation or other entity.
  • The debtor is required to file a statement listing their assets, income, liabilities, and the names and addresses of all the creditors to which they owe and how much they are owed.
  • After filing the petition as per the law, it stays or prevents creditors from debt collection actions against the debtor and the debtor’s property. As long as the stay remains in effect, creditors cannot bring or continue lawsuits, make wage garnishments, or even can’t make a telephone call demanding payment.
  • Notice is given from the court clerk to the creditor that the debtor has filed a bankruptcy petition.
  • Some bankruptcy cases are filed to allow liquidation of the debtor’s property (Chapter 7), while in some cases, a debtor has to reorganize and establish a plan to repay creditors (Chapter 11).

In most bankruptcy cases, liquidation of the property of individual consumers is involved. There is little or no money available from the debtor’s estate to pay creditors, and as a result, there are few issues or disputes in these cases. In the end, the debtor is normally granted a “discharge” of most debts without objection, which means that the debtor will no longer be personally liable for repaying the debts.

In other cases, however, disputes may give rise to litigation in a bankruptcy case over such matters as:-

  • Who owns the certain property, how it should use, and the worth of the property.
  • How much is owed on a debt,
  • whether the debtor should discharge from certain debts or not, or
  • how much money should pay to lawyers, accountants, auctioneers, or other professionals?

Litigation in the bankruptcy court conducts in much the same way that civil cases are handled in the district court. There may be involved in discovery, pretrial proceedings, settlement efforts, and a trial.

Important: The articles available on are neither legal advice nor a replacement for an attorney. The contents are general information and guidance concerning different legal issues. We make sure that these articles prove helpful to you, but we do not promise or guarantee that they are suitable for your condition. We also do not take responsibility for any loss that might cause to you using these articles. Hence, we strictly suggest you get expert legal advice. Consult or hire an attorney in case of any doubt.