Connecticut bankruptcy laws: What are the Laws Regarding Bankruptcies in the State of Connecticut
Bankruptcy is the status of a person or an organization who is unable to repay the debts of their creditors; often imposed through legal means by court order and initiated by a debtor. In the United States, bankruptcy as a term applies to legal proceedings involving insolvency. It is a matter of federal jurisdiction under Article 1, Section 8, Clause 4 of the United States Constitution; which empowers the Congress to enact uniform laws across the nation.
Bankruptcy cases in the United States are required to be filed in the United States Bankruptcy Court, which as an additional body with similar powers to the United States District Courts. However, the extent of the bankruptcy proceedings and the validity of claims and exemptions are dependent on State laws. In the United States Code, there are six types of bankruptcies defined in Title 11. They are:
- Chapter 7: Basic insolvency of individuals and business entities
- Chapter 9: Municipal Bankruptcy
- Chapter 11: Corporate bankruptcy; which is used by companies to function while they reorganize and rehabilitate debts while operating under unique circumstances
- Chapter 12: Rehabilitation for farmers and fishermen
- Chapter 13: Rehabilitation with debt restructuring for individuals with a regular source of income; which is also known as Wage Earner Bankruptcy
- Chapter 15: For cases when debtors are foreign entities
Bankruptcy in Connecticut
To file for any form of bankruptcy in Colorado, the debtor has to file a petition with the bankruptcy court; and can be done by an individual, a married couple, or by a business organization. Along with the petition, the debtor is required to provide a list of assets, income, liabilities, as well as the names and details of all creditors and the amount of money owed to them. The filing of a petition automatically starts a “stay plea” which prevents the collection of debt from the debtor, as well as actions against the debtor’s property.
Creditors are entitled to receive a written notice from the clerk of the court where the bankruptcy petition has been filed. Depending on the nature of bankruptcy application, as well as the balance of assets and liabilities; the court proceeds with the restructuring of the debt and the liquidation of the debtor’s assets. In case of disputes, creditors as well accountants, lawyers, and auctioneers have the right to file litigation suits to ascertain the ownership of assets and resolve disputes that can arise from the same. Bankruptcy courts handle litigation as per the law of the state; and work in the same manner as civil courts; with processes including discovery, pre-trial proceedings, settlement efforts, and a trial.
Advantages and Disadvantages of Bankruptcy Filing
Filing bankruptcy for individuals as well as organizations has certain benefits; but also has certain shortcomings.
- Bankruptcy laws in Connecticut allow individuals and organizations to start again; with the debts being owed for secured assets.
- Protection against collection efforts by the creditors
- Post-bankruptcy, all wages for individuals are debt-free
- Bankruptcy cases are often discharged within three to six months
- If bankruptcy is filed under Chapter 13 and is provided a full repayment plan by the debtor; co-signors are immune from creditor’s reclamation efforts.
- For individuals with a steady income filing for Chapter 13, the court has the discretion to exempt all property against creditor’s claims.
- There is a possibility of loss of non-exempt property which can be sold by the trustee.
- For individuals, bankruptcy allows for a temporary stay on the foreclosure of homes
- Creditors have the right under Section 707(b) of the Bankruptcy Code to dismiss a petition against a debtor.
- Loan co-signors are stuck with repayment unless they too filed for bankruptcy.
- Stockbrokers and equity traders are prohibited from filing a Chapter 13 bankruptcy petition