Bankruptcy law provides for the development of a plan that allows a debtor, who is unable to pay his creditors, to resolve his debts through the division of his assets among his creditors. The philosophy behind the law is to allow the debtor to make a fresh start, not to be punished for inability to pay debts. Bankruptcy law allows certain debtors to be discharged of the financial obligations they have accumulated, after their assets are distributed, even if their debts have not been paid in full. Some bankruptcy proceedings allow a debtor to stay in business and use business income to pay his or her debts.
Bankruptcy law is federal statutory law contained in Title 11 of the United States Code. Congress passed the Bankruptcy Code under its Constitutional grant of authority to "establish. . . uniform laws on the subject of Bankruptcy throughout the United States." See U.S. Constitution Article I, Section 8. States may not regulate bankruptcy though they may pass laws that govern other aspects of the debtor-creditor relationship. A number of sections of Title 11 incorporate the debtor-creditor law of the individual states.
[Summary from Bankruptcy, Legal Information Institute, http://www.law.cornell.edu/wex/bankruptcy (last visited Oct. 24, 2014).]
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Bankruptcy – A statutory procedure by which a (usu. insolvent) debtor obtains financial relief and undergoes a judicially supervised reorganization or liquidation of the debtor's assets for the benefit of creditors.
Chapter 7 – The chapter of the United States Bankruptcy Code allowing a trustee to collect and liquidate a debtor's nonexempt property, either voluntarily or by court order, to satisfy creditors.
Chapter 11 – The chapter of the United States Bankruptcy Code allowing an insolvent business, or one that is threatened with insolvency, to reorganize its capital structure under court supervision (and subject to creditor approval) while continuing its normal operations.
Chapter 13 – The chapter of. the United States Bankruptcy Code allowing a person's earnings to be collected by a trustee and paid to creditors by means of a court-approved debt-repayment plan if the person has a regular income. Sometimes called a wage-earner plan, or an income-based plan.
Claim – The assertion of an existing right; any right to payment or to an equitable remedy, even if contingent or provisional.
Creditor’s Claim – A claim that a creditor has against a debtor.
Creditor – One to whom a debt is owed; one who gives credit for money or goods. A person or entity with a definite claim against another, esp. a claim that is capable of adjustment and liquidation.
Debtor – One who owes an obligation to another, esp. an obligation to pay money.
Voluntary Bankruptcy – A bankruptcy case commenced by the debtor.
Involuntary Bankruptcy – A bankruptcy case commenced by the debtor's creditors.
Liquidation – The act of determining by agreement or by litigation the exact amount of something (as a debt or damages) that before was uncertain The act or process of converting assets into cash, esp. to settle debts.
All definitions are from Black's Law Dictionary (9th ed. 2009).
Bankruptcy: Sponsored by the Texas Legal Services Center, a non-profit law office, this website provides guides, videos, and publications on bankruptcy, alternatives to bankruptcy, and what comes after bankruptcy.
Bankruptcy in Texas: This website gives a brief, general introduction to the topic of bankruptcy.
Texas Bankruptcy Law: This website explains the federal bankruptcy process and includes bankruptcy resources specific to the needs of Texas residents.
State Bar of Texas Bankruptcy Law Section: The official website of the Bankruptcy Law Section of the State Bar of Texas includes links to various bankruptcy resources, as well as access to the Section’s newsletter.
Bankruptcy Basics: This website is a publication of the Bankruptcy Judges Division of the Administrative Office of the U.S. Courts and provides individuals who may be considering bankruptcy with answers to some of the most commonly asked questions about the bankruptcy process.