NATIONAL
DIVORCE & BANKRUPTCY CENTER
Now In Our 14th Year!
Debtors get much needed 'breathing room' and discharge or reorganize
(chapter 13):
Bankruptcy Reform Act of 1994:
House Report No. 103-835
(October 4,5,1994)
***Note: The following is a reprint of sections
of House Report No. 103-835 P.L. 103-394
; Congressional Record Vol. 140 (1994) unless otherwise
noted; (With emphasis added for clarity and ease of reading).
The entire text is available at any public library.
" The legacy of runaway debt and rampant financial
speculation in the 1980's is a massive increase in bankruptcy filings in
the 1990's."
"The uniform national bankruptcy system is designed to
achieve two equally important objectives.
#1 The first is to provide honest
debtors who have fallen on hard times the opportunity for a fresh start in
life, after they have made a good-faith attempt to pay what they can.
This not only helps honest debtors from being relegated to a
lifetime of destitution or the functional equivalent of financial indentured
servitude from which they can never hope to recover, but also helps reinforce the incentives for
healthy business entrepreneurship, which are the lifeblood of economic growth in
a free market system.
#2 The second objective of the
bankruptcy system is to protect creditors in general by preventing an insolvent
debtor from selectively paying off the claims of certain favored creditors at
the expense of others. Because the essence of insolvency is that there is
not enough money to pay all claims in full, there is an inevitable temptation
among creditors to compete fiercely over the debtor's limited funds. The bankruptcy system is thus designed to enforce a distribution
of the debtor's assets in an orderly manner in which claims of all creditors are considered fairly, in
accordance with established principles rather than on the basis of the inside
influence or economic leverage of a particular creditor.
" The bankruptcy system accomplishes these goals
through several mechanisms. The filing of a bankruptcy
petition - by a debtor...triggers an "automatic stay" of pending actions against
the debtor by creditors to recover claims." The
automatic stay immediately stops creditors from
trying to collect from the debtor [i.e. stops foreclosure
sales, repossessions, judgments, garnishment proceedings
etc.].
FILING BANKRUPTCY IMMEDIATELY STOPS: