Many times the subject of bankruptcy appears baffling in its complexity. Actually the fundamental principals of bankruptcy are fairly simple even although the federal statuses on bankruptcy are substantial. The cause that the statutes are so complicated is simply because in as effort at social engineering, the lawmakers want to cover every feasible contingency. The very complexity of the Bankruptcy Code gives the attorneys sufficient opportunity to attempt to obtain interpretation of the law which greatest serves their customers interest. This results in substantial litigation and sometimes in interpretations of the Code which were not what legislature intended. This on flip results in additional legislation, which results in additional litigation and on and on. Nevertheless, the underlying principals are not as complicated as the Code makes them appear. Right here we will talk about the individual nature of bankruptcy.

The concept of bankruptcy is an aged 1 in the English common law. If a individual could not pay his debts, his collectors hauled him into court, took all of his assets, and utilized these assets to fulfill their debts. If the assets were insufficient to fulfill the debts, the debtor was taken from the bankruptcy court to debtors’ prison. Since this is a rather intense treatment, Write-up 1 Section 8 of the U.S. Constitution gives the Congress the correct to set up “?.uniform Laws on the subject of Bankruptcies throughout the United States.”

As the recognition of debtors’ prison declined, the concept of providing the debtor a fresh start became 1 of the primary purposes of the bankruptcy process. It is important to remember that a bankruptcy is a individual action which at time of discharge gives the petitioner (formerly the debtor) a fresh start. The house owned by the petitioner does not get the fresh start, the person does.

The fact that bankruptcy is a individual action may shed some light on the effect of a homestead exemption in a bankruptcy proceeding. The bankruptcy code acknowledges the validity of homestead exemption. A homestead exemption is a individual exemption which, in an effort to preserve a person’s home, safeguards a particular quantity of an individual’s equity in the homestead house. State law determines the extent and effect of a homestead exemption. Thus, if state law says that a individual can declare a homestead up to $45,000 and if there is less than $45,000 equity in the house, that equity in the house is guarded by the homestead exemption. This principal operates with out regard to the Federal Bankruptcy Code.

By John E. Roush, Broker-Proprietor Atrium Real Estate Investments. John is a complete-time actual estate agent specializing in actual estate investment and actual estate investment education. To contact John deliver all correspondence to Johnr@investorloft.com

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