What is Bankruptcy?
The origin of the word “bankruptcy” is derived from the French word, banquerote, meaning "broken bench," and refers to a time in the middle ages when a merchant lost his trading bench in the marketplace as a penalty for not paying debts. In those bygone days, bankruptcy served as punishment for the business transgressions of merchants and tradespeople. Today, the laws are more complex, serving to grant honest debtors a fresh start – not to punish for misdeeds. The bankruptcy laws are often thought of as public benefit or “safety net” laws which protect people, whom, after having suffered a financial disaster, are in need of help to become productive members of society again.
In the United States, the main laws governing bankruptcy proceedings are federal statutes known as the Bankruptcy Code. Even though the “Code” is a federal law, there can be significant differences from state to state for certain aspects of the law, such as property exemptions or procedural requirements.
The bankruptcy laws are administered by a special bankruptcy court system, set up to administer the cases and resolve disputes between debtors and creditors. Bankruptcy courts are divided into districts. The Western District of New York has a court located in Buffalo covering the eight counties west of Rochester.
Under the Bankruptcy Code there are several different forms of bankruptcy which can be specifically utilized by either consumers, businesses, municipalities, or family farmers. Most consumers, though, will utilize either Chapter 7 or Chapter 13. "Chapter" refers to the section of the Code where the specific laws are found.
