US Bankruptcy
In US Bankruptcy law, bankruptcies are possible for businesses and companies and for private individuals. Americans are generally considered to be particularly risky individuals. One of the framework conditions for this is probably the possibility of consumer bankruptcy, which makes it possible to go bankrupt in the event of failure and then start again ( fresh-start model ).
In 2000, there were approximately 1.3 million business and personal bankruptcies in the United States (with approximately 280 million residents), while in Germany, there were only around 40,000 bankruptcies (with 82 million residents). About the number of residents, bankruptcy in the United States for every 215th inhabitant, in Germany for every 20-50th inhabitant!
American law recognizes several forms of bankruptcy: The liquidation (= dissolution of the debtor's assets). The reorganization of the debtor's assets for restructuring.
The Federal Bankruptcy Code contains the following regulations in particular.
Chapter 7 - Liquidation
Complete the dissolution of the debtor's assets to best satisfy the creditors from the bankruptcy estate. The settlement will be entrusted to a bankruptcy administrator appointed by the bankruptcy judge. According to this provision, the majority of bankruptcies are settled. Over-indebted private individuals use only their assets but not their monthly disposable income for debt relief and generally get relief from residual debt within a few weeks. In 2000, approximately 859,000 over-indebted US citizens chose this method. After 6 years, a procedure according to Chapter 7 can be carried out again.
Chapter 11 - Reorganization
The debtor remains in control of his assets and reorganizes an asset manager. He is entitled to submit a restructuring plan within 120 days, which includes distributing certain assets among the creditors. After the deadline, each party can submit such a restructuring plan. For their part of the creditors form a control body. According to this regulation, the insolvency of the Kmart group of companies is currently being processed (as of March 2002).
Chapter 13 - Reorganization / Consumer Reorganization
In the case of consumer bankruptcy for private individuals, the debtor must make payments to creditors following a plan approved by the bankruptcy judge. Afterward, the court will waive all remaining debts ( discharge ). In addition to the assets, private individuals must also make their disposable income available to creditors for at least 3 years. Only around a third of all plans are fulfilled by the debtors; around two-thirds have to be modified or even abandoned due to changing living conditions.
Bankruptcy Estate
The bankruptcy estate includes the entire assets of the debtor, regardless of where on earth and regardless of whether they are protected rights or not. Due to regulations in federal laws, however, the house ( homestead exemption ) and the debtor's wages, as well as pension, disability, pension, and insurance benefits, are usually excluded from the bankruptcy estate within certain value limits. There are no limits to the number of homes in some states so that even million-dollar properties are "bankrupt" (e.g., Florida, Texas ).
Prohibition of Enforcement (Automatic stay)
When filing for bankruptcy ( filling up bankruptcy proceeding ), creditors are no longer permitted to collect claims ( automatic stay; Section 362 a Bankruptcy Code ).
Ranking
The bankruptcy estate is divided among the creditors according to their rank:
Secured Creditors
Primary Creditor (Priority Creditors; distribution costs incurred by the bankruptcy petition liabilities, job claims, tax debts, etc.)
Unsecured Creditors
Fines, Shareholders
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