In the United States law, bankruptcies are not only possible for business enterprises and companies, but also for private individuals. Americans are commonly regarded as particularly vulnerable individuals. One of the basic conditions for this could be the possibility of each consumer’s desire to spend money, which makes it possible to go bankrupt and, thus, get a fresh start.
Several forms of bankruptcy
In 2002, there were about 1.5 million businesses that underwent bankruptcy proceedings in the USA. American law recognizes several forms of bankruptcy:
- Liquidation, which is the dissolution of a debtor’s assets
- The reorganization of the debtor’s assets for the purpose of rehabilitation
Bankruptcy attorneys are in the business of fighting for their client’s rights. The US Bankruptcy Code contains, in particular, has the following provisions:
Complete liquidation of the debtor’s assets to satisfy creditors as best as possible from the bankruptcy. The liquidation will be transferred to a bankruptcy court designated by the bankruptcy court. According to this provision, most bankruptcies are settled.
Overstretched individuals exclusively use their assets to start debt relief, but not their monthly disposable income. In 2002, approximately 860,000 US citizens made this choice. After 6 years, a Chapter 7 filing can be carried out again.
The debtor retains control over his or her assets and acts as a property manager. They are entitled to submit a restructuring plan within 120 days, which includes a distribution of certain assets among the creditors. Once the deadline has expired, each party may submit such a rehabilitation plan.
For their part, the creditors form a control body that the court approves and the debtor must adhere to.
In the case of a private consumer, the debtor must make payments to creditors in accordance with a plan approved by the bankruptcy court. Thereafter, the court will issue all outstanding debts (the discharge). In addition to the assets, private individuals must also make available their available income to the creditors for at least 3 years.
Only a third of all plans, nearly, are fulfilled by the debtors; about two-thirds must be modified or even abandoned as a result of altered living conditions.