Goals of Bankruptcy

I. INTRODUCTION TO THE BANKRUPTCY CODE AND RULES

A. Goals/Objectives.

The principal goals of consumer bankruptcy are twofold: (1) an equitable distribution of the

nonexempt property of the debtor among creditors; and (2) to provide the debtor with a “fresh start”

in life by relieving the debtor of the burden of existing debt. The Bankruptcy Code: (1) provides

certain protections for creditors either as a class or as a whole; (2) establishes the priority in which

creditors may receive a distribution; (3) discharges a debtor from most, if not all, obligations; and

(4) provides for the debtor to retain property, called “exempt property,” intended to permit the

debtor to provide some measure of support for the debtor and the debtor’s dependents free from

the claims of creditors whose claims are discharged .

In the consumer context there are two principal bankruptcy processes: (1) a liquidation by sale

of the debtor’s nonexempt assets and distribution of the proceeds among the creditors (chapter 7

“liquidation”); or (2) a plan for the debtor to retain his or her property and pay creditors, in full or in

part, from future income according to a statutorily mandated scheme (chapter 13 “debt adjustment

plan”). The materials that follow explain the way the two statutory schemes work, their differences,

and the duties and responsibilities of the debtor in the bankruptcy process.