federal bankruptcy laws
Bankruptcy Law

What Are The Federal Bankruptcy Laws?

| September 24, 2022

Federal Bankruptcy Laws are extremely important as they make provisions for the elimination of certain kinds of debts that can be very beneficial to the public. These also stipulate a certain timeline within which nondischargeable debts are supposed to be paid.

Why and how are federal bankruptcy laws important one may ask. These laws help out an individual ultimately pay off any secured debts that they had availed and be worry-free. 

Now, What Is A Non-Dischargeable Debt?

A non-dischargeable debt is a kind of debt that cannot be considered extinguished, and even federal laws cannot extinguish them in case of bankruptcy.

What Exactly Are Secured Debts?

What Exactly Are Secured Debts

Unsecured debt is when a person takes a loan and does not offer collateral against it. Obviously, a secured debt in this case would be one against which collateral has been offered.

A secured debt is thus preferred for various reasons such as it being suitable for the debtor. These debts are acquired by putting up personal property, such as one’s house, apartment, plots of land, jewelry, and even a vehicle. 

So, What Are The Federal Bankruptcy Laws?

So, What Are The Federal Bankruptcy Laws

Federal Bankruptcy Laws of the United States Of America are dealt with in chapter 11 of the Code of the United States. 

United States Congress had passed the Code when it was granted authority under the Constitution of the United States. 

The Bankruptcy Code was established with one particular aim. It was designed to give the people of the United States one Uniform Code which governed all Bankruptcy Laws of the nation. The Bankruptcy laws were seen as a valuable addition to the federal laws of the nation. 

Most federal laws serve one primary purpose, to serve as the primary and complete source of legislation for the states to abide by. The United States is a federation of 50 states. All states have different constitutions. Thus, federal laws make sure that bankruptcy laws and rules remain the same throughout the nation and the citizens of all states understand that they are all part of the same country after all.

Section 8 Article 1 of the Constitution of the United States calls for the authority that led to the formation of federal bankruptcy laws. Section 8 says that the Congress of the United States has been vested with the power to collect taxes, duties, and imposts, and also pay off the debts that are necessary for the general welfare.

This provision has the main statute that gives Congress the power when it comes to federal bankruptcy laws. It gives Congress the power to establish uniform legislation that has a naturalization effect, and also establish uniform laws relating to bankruptcies that are to be applicable throughout the United States.

What Bankruptcy Laws Can Be Passed By The State?

What Bankruptcy Laws Can Be Passed By The State

By the provisions mentioned in this section, states are prohibited from making bankruptcy laws. Although the state can make necessary legislations dictating the relationship between its residents, that is in the capacity of debtor and creditor.

Chapter 11 makes the necessary laws that warrant the creditor-debtor relationship

Bankruptcy Court

Bankruptcy Court

All disputes arising from bankruptcy-related matters are dealt with in the bankruptcy court. The bankruptcy court is a part of the federal judicial system. All of the ninety-four federal courts of law deal with bankruptcy matters. Bankruptcy matters are only to be heard in federal courts. State Courts are not authorized to deal with bankruptcy matters.

Federal Bankruptcy Laws Purpose

Federal Bankruptcy Laws Purpose

Bankruptcy laws deal with matters where the debtor is not being able to pay off debts and thus has to take the help of the government to get their assets liquidated. Here is a detailed list of purposes that bankruptcy laws serve. 

  • Liquidation of assets.
  • Formulation of an alternate repayment plan. 
  • Provide legitimate protection for troubled businesses.
  • Provide for the distribution of assets in order.
  • Provide for the reorganization and sale of assets.

Federal Bankruptcy Laws Chapter 7

Chapter 7 lays down provisions regarding the discharge process of debts that are unsecured. Individuals and corporations who have a business debt can avail of the provisions of this chapter.

Federal Bankruptcy Laws Chapter 9

Municipalities and other local entities can file for bankruptcy. 

Federal Bankruptcy Laws Chapter 11

This is the most detailed chapter on bankruptcy and provides the option of reorganizing loans. 

Chapter 12 calls for debt provisions regarding family farmers. Only family farmers are eligible under this chapter.

Federal Bankruptcy Laws Chapter 13

Chapter 13 of the laws lays down provisions regarding the repayment of debt over a 3 to 5-year period.

And It’s A Wrap!

Bankruptcy can be a very difficult topic for the people going through it. The federal government has very well done its share to contribute to the solution. The bankruptcy laws aim to sort out problems regarding the same for which multiple complications have mounted, and the statute of limitations has also expired. 

Do let us know if you find the article informative!

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Susmita Sen
Susmita Sen

Susmita Sen has started his journey in the Digital Marketing field. She has more than 1 year of experience in SEO. She likes to share her thoughts for the Website’s achievement goal. She is so passionate about bright career in this ways. Susmita has interest about travelling, cooking in various dishes, reading books about human psychology, and listening to music.


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