The United States Bankruptcy Court handles approximately 1.5 million bankruptcy filings each year in one of 94 federal court districts (state courts are not authorized to adjudicate bankruptcy matters). The primary purpose of bankruptcy protection is to allow debtors the option to escape insufferable and insurmountable debts. The U.S. Bankruptcy Court additionally attempts to recoup, from the claimant, all available property and equity to distribute amongst the creditors. Seen as a method of last resort, without the recourse of bankruptcy protection, debtors would forever remain under a cloud of unmanageable debts.
In ruins with arrears of $60 billion, Enron, the current poster-boy of fraudulent business practices, recently petitioned and received bankruptcy protection — forcing the company to liquidate the entirety of assets to the tune of $12 billion (meaning creditors are left with 20 cents to the dollar). On paper, Enron appears to have escaped with a phenomenal deal, but consumers and small business owners contemplating bankruptcy should consider the immense difficulty of rebuilding without any assets. When a business or debt-ridden consumer sues for bankruptcy protection, all cash and equity owned by the business or consumer, respectively, is remanded to the court for credit reparations. In essence, one walks away free in both senses of the word — liberated from debt and worth absolutely nothing.
The U.S. Bankruptcy Court steadfastly warns debtors deciding to petition for bankruptcy to contact an attorney. Online resources proliferate throughout the web offering assistance to debtors filing for bankruptcy; check the reliability of any company considered. Most certainly a complex endeavor, filing for bankruptcy requires a colossal amount of paperwork and, if filled out mistakenly, property and/or other remaining assets could, avoidably, be lost. The choice of representation is, therefore, paramount; again, make sure the attorney or bankruptcy assister is reputable and competent.
U.S. Bankruptcy Court additionally advises that all pertinent forms should be filled out before filing for bankruptcy since debtors are granted only 15 days after filing to submit all appropriate paperwork (extensions are available, but disagreeable to the court). Those hapless debtors who are unable to cover the sometimes weighty bankruptcy court fees can petition to pay under a lenient installment plan.
Other conditions apply: Debtors must notify creditors of all relevant information concerning the case. And debtors must also detail current sources of income for the Bankruptcy Court, as well as any expenditures. In short, filing for bankruptcy is an arduous process — some kind of professional assistance is generally needed to ensure accuracy of the procedure. Remember: Forgetting to file on time or filing mistakenly could result in wide-ranging and permanent repercussions.
The undeniable importance of the U.S. Bankruptcy Court is that it grants beleaguered debtors recourse to an unsolvable problem — exorbitant and insurmountable debt. And while corporations and consumers cannot unjustifiably cry wolf whenever debt looms, the United States Bankruptcy Court stands as a haven to those honest debtors with truly no place else to turn (except their creditors scowling faces). So, if bankruptcy protection seems a viable and needed option, I suggest a timely call to your attorney and a thorough search of online options; and, while you’re at it, you’d better pick up a rather voluminous copy of the United States Bankruptcy Code. Turn to chapter 11; it’s my favorite.
By Jean-Pierre Lacrampe