How to File for Bankruptcy in the United Kingdom

Introduction 

Bankruptcy is a procedure that protects debtors in pursuit for relief from the unsustainable financial circumstances and helps creditors in their attempts to recover obligations from their respective debtors (Zhu, 2013). Incorporated entities and individual entities may resort to the protections provided by federal bankruptcy. A debtor ought to file a petition with the federal bankruptcy courts to initiate the commencement of the bankruptcy case. During this particular time, the debtor often gains temporary protection from his creditor. The court may help the debtor to restructure his debts into alternative manageable obligations, mandate the sale of the debtor’s assets to assist creditors recover the money owed by the debtor, or discharge the debtor from individual liability on certain obligations depending on the type of bankruptcy case. Information on the different features of the federal bankruptcy laws are usually contained in the bankruptcy basics publication. Bankruptcy basics is a publication provided by the Administrative Office of the United States Courts which provides fundamental information to the general public, court personnel, debtors, the media, and creditors on the disparate features of the federal bankruptcy laws (Zhu, 2013). Bankruptcy also provides basic explanations of the disparate chapters contained under the filing procedures of a bankruptcy case and answers to people who may be considering bankruptcy. The paper provides a summary of the bankruptcy process and an in-depth information on the different types of bankruptcy cases. 

Summary of the Bankruptcy Process 

The U.S constitution sanctions Congress to implement homogenous laws on the discipline of bankruptcies under Article 1, Section 8. The U.S Congress implemented the Bankruptcy code, (codified or classified as title 11of the U.S. Code) under this authority provided in the year 1978. The several amendments regarding the Bankruptcy Code have been carried out since the code’s enactment. Bankruptcy cases are usually governed by the Uniform Federal Law. The methodological facets of the bankruptcy proceedings are guided by the Bankruptcy Rules and the regional regulations of every bankruptcy court. Bankruptcy Rules are usually characterized with a set of official documents for use during the bankruptcy case procedures. The Bankruptcy Rules and Bankruptcy Code often establish the formal legal processes for handling individual and organizational debt issues (Wessels & Weijs, 2015). There is usually a bankruptcy court for every juridical district in the U.S. Every state is typically characterized with one or more districts within its boundary. There are a total of ninety bankruptcy districts within the nation and every court has its clerk offices. The U.S. bankruptcy judge, who is basically a juridical officer of the U.S district court is accorded the power to make decisions regarding bankruptcy cases. 

The judge may implement various bankruptcy case decisions such as whether the debtor should be granted a discharge of debts or whether one is entitled to file for bankruptcy. However, numerous bankruptcy procedures are usually administrative and they ought to be conducted outside the courthouse. The administrative procedures may be executed by an appointed trustee in bankruptcy cases under chapter 12, 13, and 7. A debtor’s interaction with the bankruptcy judge is often very restricted. A chapter 7 debtor may not make an appearance in court and may not even catch sight of the bankruptcy judge unless in instances where an objection is presented in the case. Atypical chapter 13 debtor may make an appearance before the judge during the plan confirmation hearing process. Normally, the only formal procedure where the debtor is obliged to appear is at the meeting of creditors; this meeting often takes place at the United States trustee offices. The creditor’s meeting is frequently termed as the “341 meeting” since under section 341 of the Bankruptcy Code, debtors are usually instructed to attend the meeting to allow the questioning of debtors on issues regarding property and debts by the creditors (Winship, 2013). The basic objective of the enactment of the bankruptcy laws by the American Congress is to provide debtors with a new financial beginning from onerous debts. The objective is usually attained through the discharge of bankruptcy that basically releases debtors from their individual responsibility for particular debts and bars creditors from any attempt to pursue actions against the debtor with the aim of collecting the respective debts. 

Types of Bankruptcy Cases 

There are generally five types of bankruptcy cases; they include Chapter 7, Chapter 13, Chapter 11, Chapter 9, Chapter 15, and Chapter 12 (Clement, 2015). Chapter 7, otherwise referred to as the liquidation procedure, incorporates a systematic court-supervised process, whereby, a trustee assumes control over the debtor’s estate, dissolves it into liquid cash, and institutes its dispensation to creditors in accordance with the debtor’s entitlement to keep possession of specific exempt properties and the entitlement of the secured creditors. Chapter 13 is usually structured for a debtor who possess a constant source of remuneration. Chapter 13 is usually preferred to chapter 7 due to its provisions which basically allows the debtor to retain an invaluable asset, and since it permits the debtor to recommend a proposition to recompense the creditors through a period of approximately three years to five years. The chapter may also be employed by consumer debtors who are not eligible for the aid provided under chapter 7 (Wessels & Weij, 2015). During the confirmation hearing, the bankruptcy court may disapprove or approve the repayment plan provided by the debtor depending on the plan’s capacity to attain the confirmation requirements under the Bankruptcy Code. Unlike chapter 7, chapter 13 allows the debtor to keep the possession of properties considered valuable to the debtor. Chapter 11, alternatively referred to as reorganization, is typically employed by commercial enterprises that wish to proceed with their business operations and repay creditors contemporaneously through a reorganization plan approved by the court (Wessels & Weij, 2015). 

Under the eleventh chapter, the debtor often possesses the exclusive entitlement to present a reorganization plan for the first one hundred and twenty days following the filling of the case. The debtor is obliged to provide creditors with a declaration statement which contains sufficient information to facilitate the creditor’s evaluation of the plan. The court may ultimately disapprove or approve the reorganization plan. The debtor may decrease his debts by repaying a segment of its commitment and discharging the rest, under chapter 11. The debtor may also conclude inconvenient leases and contracts and re-evaluate its operations to enhance profitability. Under this chapter, the debtor usually experiences a consolidation period which subsequently enhances the reduction of the debt load and the reorganization of the business. Chapter 12 provides the relief of debt to fishermen and family farmers who basically have a constant income source (Winship, 2013). The procedures incorporated under chapter 12 are increasingly similar to the executed procedures under chapter 13, whereby, the debtor suggests a repayment of debts plan which is generally within a three years unless an extended period (which does not exceed 5 years) is approved by the court. A trustee, whose responsibilities are similar to those assigned under chapter 13, is usually included in every case in chapter 12. Chapter 9 allows the reorganization procedure for municipalities such as cities, school districts, and municipal utilities. Chapter 15 offers an efficient procedure for handling cases associated with cross-border insolvency. 

Chapter 7 

Background and Eligibility 

A bankruptcy case under chapter 7 doesn’t incorporate the filing of a repayment plan as seen in chapter 13. However, it involves the collection and selling of the debtors non-exempt estate and the distribution of the liquid cash to pay the respective holders of claims in line with Bankruptcy Code provisions. A section of the debtor’s property may be predisposed to mortgages and liens which commit the property to other holders of claims. Additionally, the Bankruptcy Code will permit the debtor to retain the possession of specific exempt properties but allow the liquidation of the remaining assets owned by the debtor. To be considered eligible for chapter 7 relief under the Bankruptcy Code, the debtor ought to be a corporation, partnership, an individual, or any other business organization. A person may not be allowed to file a bankruptcy case under any chapter following a prior dismissal of the bankruptcy petition during the anteceding 180 days because of the debtor’s deliberate failure to make an appearance in court or conform to the court orders, or the debtor’s voluntary dismissal of initial bankruptcy case filed by creditors. Additionally, no individual may be considered a chapter 7 debtor, unless he sought credit counseling from a sanctioned credit counseling organization either in a group or individual briefing within 180 days prior to filing for bankruptcy (Clement, 2015). Exceptions may be considered in instances where there is an emergency situation or in occasions where the bankruptcy administrator has ascertained that there are inadequate sanctioned organizations to offer the necessitated counseling. A debt management proposition ought to be filed with the respective court if it was created during the necessitated credit counseling. Under chapter 7, a discharge may be rendered available to personal debtors, as opposed to corporations and partnerships. 

The Functioning of chapter 7 

A bankruptcy case under chapter 7 commences with the filing or submission of a bankruptcy petition by the debtor. The court then serves the area occupied by the person, or its primary locale of operation, or the location of its principal assets. Additionally, the debtor is obliged to file a schedule of liabilities and assets, a schedule of the debtor’s current expenditures and income, a financial affairs statement, and a listing of unexpired leases and executory contracts with the court. Debtors ought to present a tax return copy and a copy of the filed tax returns to approved case trustee during the proceedings of the case. Individual debtors are also required to file a credit counseling certificate and a copy of the repayment plan of the debt established during the credit counseling process, proof of payment from his respective employer within sixty days prior to filing for bankruptcy. A monthly total income statement, a record of the debtor’s interest in state qualified or federal training or tuition accounts, and any expected expense or income increases after filing should also be presented by the individual debtor in court (Zhu, 2013). The court imposes a case filing fee of 245 dollars, a miscellaneous administrative fee of 4 dollars, and a trustee surcharge of 15 dollars which ought to be paid upon filing. The case trustee is required to convene a meeting of creditors within twenty-one to forty days following the filing of the petition. The trustee will then subject the debtor under oath during the meeting after which the debtor will be questioned by both the creditors and the trustee. The trustee then reports to the bankruptcy court within fourteen days after the creditor’s meeting. To grant a complete relief to the debtor, the Bankruptcy Code permits the debtor to transform the case under chapter 7 to a case under chapter 13, 12, or 11 depending on his eligibility. 

Chapter 13 

Eligibility 

Any individual is usually entitled to chapter 13 relief regardless of his employment status or the status of the business operation on condition that the unsecured or unguaranteed debts are lower than the stipulated value 360,475 dollars and the secured debts are lower than the specified amount of 1,081,400 dollars. The values are usually modified periodically with reference to the dynamics in consumer price index. However, a partnership or corporation may not be considered a debtor under chapter 13. An individual may not be allowed to file bankruptcy under chapter 13 following a prior dismissal of the bankruptcy petition during the anteceding 180 days because of the debtor’s deliberate failure to make an appearance in court or conform to the court orders, or the debtor’s voluntary dismissal of initial bankruptcy case filed by creditors (Clement, 2015). Additionally, no individual may be considered a chapter 13 debtor, unless he sought credit counseling from a sanctioned credit counseling organization either in a group or individual briefing within 180 days prior to filing for bankruptcy. Exceptions may be considered in instances where there is an emergency situation or in occasions where the bankruptcy administrator has ascertained that there are inadequate sanctioned organizations to offer the necessitated counseling. A debt management proposition ought to be filed with the respective court if it was created during the necessitated credit counseling. 

The Functioning of Chapter 13 

A bankruptcy case under this chapter commences with the filing or submission of a petition by the debtor. The court then serves the locale occupied by the person, or the primary place of operation, or the location of its principal assets. Additionally, the debtor is obliged to file a schedule of liabilities and assets, a schedule of the debtor’s current expenditures and income, a financial affairs statement, and a listing of unexpired leases and executory contracts with the court. Individual debtors ought to present a tax return copy and a copy of the filed tax returns to approved case trustee during the proceedings of the case. Individual debtors are also required to file a credit counseling certificate and a copy of the repayment plan of the debt established during the credit counseling process, proof of payment from his respective employer within sixty days prior to filing for bankruptcy. A monthly total income statement, a record of the debtor’s interest in state qualified or federal training or tuition accounts, and any expected expense or income increases after filing should also be presented by the individual debtor in court. The court imposes a case filing fee of 245 dollars, a miscellaneous administrative fee of 4 dollars, and a trustee surcharge of 15 dollars which ought to be paid upon filing. The case trustee is required to convene a meeting of creditors within twenty-one to fifty days following the filing of the petition. If the trustee organizes the meeting in a region that lacks regular trustee staffing, the meeting may be scheduled within sixty days after the debtor files for bankruptcy (Wessels & Weijs, 2015). The trustee will then subject the debtor under oath during the meeting after which the debtor will be questioned by both the creditors and the trustee. The parties often resolve their issues with the repayment plan soon after or during the creditor’s meeting. Unsecured creditors ought to file their assertions with the court within a span of ninety days after the initial date set of the creditor’s meeting if he wants to engage in the bankruptcy estate distributions. The debtor ought to file a repayment scheme with the petition within fourteen days after the filing of the petition. A plan ought to be submitted for approval by the court and should provide fixed payment values to the trustee on systematic basis. The trustee will then dispense the funds to creditors in line with the stipulated terms of the scheme (Wessels & Weijs, 2015). 

Chapter 11 

A bankruptcy case under this chapter commences with the filing or submission of a bankruptcy petition after which the court serves the debtor’s locale of residence. The petition may be classified as voluntary (debtor files the petition) or involuntary (creditors who attain the stipulated requirements). Unless specified otherwise, the debtor ought to file a schedule of liabilities and assets, a schedule of the debtor’s current expenditures and income, a financial affairs statement, and a listing of unexpired leases and executory contracts with the court. Individual debtors ought to present a tax return copy and a copy of the filed tax returns to approved case trustee during the proceedings of the case. Individual debtors are also required to file a credit counseling certificate and a copy of the repayment plan of the debt established during the credit counseling process, proof of payment from his respective employer within sixty days prior to filing for bankruptcy. A monthly total income statement, a record of the debtor’s interest in state qualified or federal training or tuition accounts, and any expected expense or income increases after filing should also be presented by the individual debtor in court. The court usually charges a case filing fee of 1000 dollars and a miscellaneous administrative charge of 46 dollars (Winship, 2013). The voluntary petition basically incorporates a standard information about the name of the debtor, tax identification or social security number, the debtor’s repayment plan or the debtor’s intent to file a plan, locality of principal assets, appeal for relief, and the area of residence. Upon filling an involuntary or voluntary appeal, the debtor ineluctably assumes a supplemental specification as the “debtor in possession.” The debtor will assume the identity until the confirmation of the debtor’s reorganization plan. The case may be transformed to chapter 11, dismissed or the appointment of a trustee may be instituted. A reorganization plan and an inscribed statement of disclosure should be filed with the court. Chapter 11 is often utilized to reorganize a business (Winship, 2013). 

Chapter 15 

The general objective of chapter 15 is to offer effective procedures for handling insolvency issues involving claimants, assets, debtors, and other parties. The general objective is further divided into specific objectives which include to foster cooperation amid U.S courts and other individuals of interest and between the courts and various proficient jurisdictions of foreign nations included in the cross-border cases of insolvency, to develop an extensive legal certainty for investments and trade, to offer an efficient and fair administrations of cross-border bankruptcy cases that conserves the creditors’ interests and the interests of other entities such as the debtor, to enhance the rescue of business facing financial difficulties, therefore, preserving employment and protecting investment, and to provide protection and value maximization of the debtor’s assets (Wessels & Weij, 2015). 

The Discharge of Bankruptcy 

A bankruptcy discharge often liberates the debtor from the individual liability for some specified forms of debt. The scheduling of discharge differs basing on the underlying chapters within which the case is filed. For instance, under chapter 7, the court normally accords a prompt discharge after the expiration of the fixed time for the filling of a petition that seeks to object the discharge and the time span established for filing a motion for the dismissal of the case due to substantial abuse; this takes place approximately four months following the filing a petition by the debtor. In individual cases under chapter 11, and the cases under chapter 13 and 12 the courts basically accord discharges practically after the debtor concludes all payments specified under the plan (Zhu, 2013). Individual discharges may be denied under chapter 13 or 7 following the debtor’s failure to complete an informational course on financial management. However, exceptions may be considered in instances where the bankruptcy trustee ascertain the inadequacy of training programs or the debtor is incapacitated, disabled, or on an operational military responsibility in a warfare zone. 

The court may also deny discharge under chapter 7 for various reasons which include the failure to present the necessitated tax documents, the concealment or transfer of property with the intention of impeding, delaying, or defrauding creditors, the failure to give an account of the lost assets, the concealment or destruction of financial records or books, and court order violation. If the issue regarding the debtor’s entitlement for a discharge is subjected to trial, the objecting group has the responsibility of establishing evidence associated with the facts considered important to the objection. Under chapter 13, may not be eligible for a discharge if he was accorded an earlier discharge in a different case four years prior to the pre-existing case. The court usually denies discharge in an advanced case under chapter 7 instances where the debtor was granted a discharge in a previous chapter 7 or 11 case filed or submitted within 8 years prior to the filling of the second petition (Wessels & Weijs, 2015). The chapter 7 discharge may also be declined by the court if the debtor was previously granted a discharge in a case filed under chapter 13 or 12 within 6 years prior to the filing date of the subsequent case. However, exceptions may be considered in instances where the debtor fully settled all the “permitted unsecured” or unguaranteed claims in the initial case, or where the debtor made installments under the initial plan that totaled to approximately seventy percent of the permitted unsecured claims. 

Conclusion 

Bankruptcy is a process that seeks to protect debtors in pursuit for relief from the unsustainable financial circumstances and helps creditors in their attempts to recover obligations from their respective debtors. The protections provided by federal bankruptcy may be accorded to both incorporated entities and individual entities. The methodological facets of the bankruptcy proceedings are guided by the Bankruptcy Rules and the regional regulations of every bankruptcy court. Bankruptcy Rules are usually characterized with a set of official documents for use during the bankruptcy case procedures. The Bankruptcy Rules and Bankruptcy Code often establish the formal legal processes for handling individual and organizational debt issues. There are generally six types of bankruptcy cases; they include Chapter 7, Chapter 13, Chapter 9, Chapter 11, Chapter 15, and Chapter 12. There are various factors that determine the eligibility of an individual or a business to file for bankruptcy. Different procedures are usually incorporated in different bankruptcy case processes. However, the processes under chapter 12 and 13 are very similar. A bankruptcy discharge often liberates the debtor from the individual liability for some specified forms of debt. The scheduling of discharge differs basing on the underlying chapters within which the case is filed. 

References 

Clement, L. A. (2015). A Study On Bankruptcy Crime Prosecution Under Title 18: Is The Process Undermining the Goals of the Bankruptcy System? Emory Bankruptcy Developments Journal , 31(2), 409-430. 

Wessels, B., & Weijs, R. d. (2015). International Contributions to the Reform of Chapter 11 U.S . Bankruptcy Code . The Hague, the Netherlands: Eleven International Publishing. 

Winship, V. (2013). Certification of State-Law Questions by Bankruptcy Courts. American Bankruptcy Law Journal , 87(4), 483-524. 

Zhu, T. (2013). Collapse and Bankruptcy of Mf Global . New York: Nova Science Publishers, Inc.