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  • Jill Russell

Bankruptcy 101

Article I, Section 8 of the US Constitution authorizes Congress to enact "uniform Laws on the subject of Bankruptcies."

Using this grant of authority, Congress created the "Bankruptcy Code" in 1978, and it has been amended several times since its enactment. Because the Constitution grants authority to the federal government, the Bankruptcy Code is a uniform federal law that governs all bankruptcy cases in Colorado and elsewhere - including US territories.

Bankruptcy's fundamental purpose is to give debtors a financial "fresh start" from overwhelming and burdensome debts. In fact, the US Supreme Court made this point in a 1934 decision for the case Local Loan Co v. Hunt: "[Bankruptcy] gives to the honest but unfortunate debtor . . . a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt." 292 U.S. 234 (1934).

There is a bankruptcy court for each judicial district in the country.

The decision-maker in a federal bankruptcy case is the US bankruptcy judge. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as your eligibility to file, or whether to grant your discharge of debts. Much of the bankruptcy process is administrative, and is conducted away from the courthouse.

In cases under chapters 7 and 13, this administrative process is carried out by a trustee, who is appointed by the court to oversee the case.

A debtor's involvement with the bankruptcy judge is usually very limited. A typical chapter 7 debtor will not appear in court and will not see the bankruptcy judge unless an objection is raised in the case. A chapter 13 debtor may only have to appear before the bankruptcy judge at a plan confirmation hearing.

Usually, the only formal proceeding at which a debtor must appear is the meeting of creditors, which is usually held at the offices of the US trustee; this meeting is informally called a "341 meeting." The term refers to section 341 of the Bankruptcy Code, which requires that the debtor attend this meeting so that creditors can question the debtor about debts and property.

A bankruptcy debtor's fresh start is accomplished through his or her bankruptcy discharge, which releases debtors from personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts.

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If you are ready to learn more about how bankruptcy could help you relieve your debt, call our office at 719-633-4541 to book your free initial consultation, or click the link to book online.

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