Understanding Bankruptcy Law in America

Business Information:

Name: Attorneys.ORG
The trusted legal directory to help you find the right bankruptcy attorney near you.
Website: https://www.attorneys.org/bankruptcy-law

PODCAST:

Welcome to the Attorneys.ORG podcast. Today we’re diving into bankruptcy law—a subject that impacts nearly two million Americans every year. With more than 1.4 million personal bankruptcy petitions filed annually, it’s a reality for countless individuals and families. Thankfully, unlike in the days of Charles Dickens, we don’t live with debtor’s prisons or poorhouses. In modern America, bankruptcy law provides a structured way to address overwhelming debt without fear of jail time.

So, where does this system come from? The authority traces back to the United States Constitution. Article I, Section 8, Clause 4 gives Congress the power to establish uniform laws on bankruptcy across the nation. Federal law controls the procedures, but state laws determine property rights and exemptions. That’s why bankruptcy law looks very different depending on where you live.

For example, Florida allows you to protect your entire home, no matter the value, if you file for bankruptcy. In Ohio, the exemption is capped at just over $21,000 for individuals and around $43,000 for married couples. Arizona sets the figure at $150,000, while California has a more complex set of categories with exemptions starting at $75,000. These homestead exemptions are a critical part of how bankruptcy law protects people’s property.

Now, let’s break down the different chapters of bankruptcy law.

👉 Chapter 7 Bankruptcy – Often called “liquidation bankruptcy,” this process involves selling assets to pay creditors. In reality, many filers keep most, if not all, of their property due to exemptions. Individuals must pass a “means test” to qualify, but there are multiple ways to meet the requirement. The result? Relief from debt and a fresh start.

👉 Chapter 13 Bankruptcy – Known as the “wage earner’s bankruptcy” or “reorganization bankruptcy,” this allows individuals to renegotiate debts into a three-to-five-year repayment plan. Instead of losing property, you can often reaffirm certain debts and keep valuable assets, like your home or car, while sticking to a manageable schedule.

👉 Chapter 11 and Chapter 12 Bankruptcy – These chapters apply primarily to businesses, farmers, and fishermen. Much like Chapter 13, the focus is on reorganization rather than liquidation. Companies can continue operating while renegotiating contracts and debt obligations under the protection of the court.

Across all of these chapters, bankruptcy law is not about punishing debtors—it’s about providing a legal framework to protect individuals, families, and businesses while giving creditors an orderly way to recover what’s owed.

If you’re considering whether bankruptcy might be right for you, remember that laws vary significantly from state to state. That’s why consulting a qualified bankruptcy attorney in your state is essential. An experienced lawyer can explain your exemptions, guide you through the process, and help determine whether Chapter 7, Chapter 13, or another option is your best path forward.

Bankruptcy is never easy, but it is a powerful tool built into the American legal system. It can provide relief, dignity, and a fresh start.

Visit Attorneys.ORG to find a bankruptcy attorney near you.