U.S. bankruptcy law contains provisions that allow certain debts to be reduced or annulled, explains Cornell University Law School. The statute can also be used to generate a timeline for repaying nondischargeable debts, and it often allows indebted parties to repay loans secured with real estate and other collateral at more favorable terms. While the ordinance restricts states from regulating bankruptcy, it allows them to manage certain elements of the lender-borrower relationship.
The U.S. bankruptcy courts, which are part of the district court system, handle all cases relating to the bankruptcy law, which is found in Title 11 of the U.S. code, explains Cornell University Law School. Bankruptcy rules, enacted by the Supreme Court with authority from Congress, regulate the operations of these courts.
The law sets out five types of bankruptcy, reports Cornell University Law School. Chapter 7 contains provisions that allow for the annulment of personal loans, credit card debt and other forms of unsecured obligations. The provisions in Chapter 7 do not extend to secured debt, nor do they allow individuals to access its protections unless they meet certain income requirements.
The provisions in Chapter 9 focus on debt reorganization in municipalities, county-owned hospitals and similar entities, while those in Chapter 12 revolve around family farm debt, notes Cornell University Law School. The stipulations in Chapter 13 relate to debt restructuring for individuals, while Chapter 11, the most comprehensive section of the bankruptcy law, contains provisions that allow for myriad methods of debt reorganization.