DEFINITION

• Bankruptcy is a statutory procedure initiated by an insolvent individual, an insolvent business, or creditors seeking to have debts discharged or reorganized by the courts.

• Bankruptcy law is primarily federal law, but states retain jurisdiction over certain issues.

• The three most frequent types of bankruptcy petitions are Chapter 7 (Individual Bankruptcy), Chapter 11 (Business Reorganization) and Chapter 13 (Wage Earner's Plan).

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RELATED PRACTICE AREAS

Real Estate Law
Family Law
Criminal Law
Business & Commercial Law

BUZZWORDS

Bankruptcy Petition - The document filed in Bankruptcy Court that details the assets and liabilities of the debtor.

Chapter 7 (Individual Bankruptcy) - A petition designed to liquidate the debtor's property, pay off his or her creditors, and discharge the debtor from his or her other debts.

Chapter 11 (Business Reorganization) - A petition designed to reorganize business debt. The business normally is permitted to continue its operations under court supervision until some plan of reorganization is approved by the creditors.

Chapter 13 (Wage Earner's Plan) - A petition designed for any insolvent debtor who is a wage earner to provide the debtor with additional time to pay off creditors.

Discharge - The release of a debtor from all debts previously owed, except those which are not allowed by the Bankruptcy Code.

Insolvent - Inability of a person or business to pay debts because liabilities exceed assets.

Reorganization - The preparation of a plan in bankruptcy to financially restructure the repayment of business debt.