Bankruptcy Laws -- The Federal Bankruptcy Code

The Bankruptcy Code: Title 11 of the U.S. Code

The Bankruptcy Code is the body of federal law that governs all bankruptcy proceedings in the United States. It is codified as Title 11 of the United States Code (11 U.S.C. §§ 101-1532). The Code is supplemented by the Federal Rules of Bankruptcy Procedure and local court rules in each district.

The Constitution gives Congress the power to establish "uniform Laws on the subject of Bankruptcies throughout the United States" (Article I, Section 8, Clause 4). This means states cannot create their own bankruptcy systems, though they do play an important role in defining property exemptions.

The modern Bankruptcy Code was enacted in 1978 as the Bankruptcy Reform Act, replacing the former Bankruptcy Act of 1898. It has been amended many times since, most significantly by BAPCPA in 2005.

Chapters of the Bankruptcy Code

The Bankruptcy Code is organized into chapters. Some chapters contain procedural rules that apply to all cases, while others establish specific types of bankruptcy proceedings:

Procedural Chapters (Apply to All Cases)

• Chapter 1 (11 U.S.C. §§ 101-112): General provisions, definitions, and rules of construction used throughout the Code.
• Chapter 3 (11 U.S.C. §§ 301-366): Case administration -- how cases are commenced, the role of officers (including the trustee), and administrative powers.
• Chapter 5 (11 U.S.C. §§ 501-562): Creditors, the debtor, and the estate -- claims, exemptions, the automatic stay (Section 362), and the trustee's avoidance powers.

Substantive Chapters (Types of Bankruptcy)

Chapter	Who Can File	How It Works
Chapter 7	Individuals, businesses	Liquidation -- a trustee sells non-exempt assets to pay creditors; remaining eligible debts are discharged. Most consumer bankruptcies are Chapter 7.
Chapter 9	Municipalities	Debt adjustment for cities, counties, and other municipal entities. Rare -- fewer than 10 cases filed per year nationally.
Chapter 11	Businesses, high-debt individuals	Reorganization -- the debtor proposes a plan to restructure debts while continuing to operate. Subchapter V (added 2019) provides a streamlined process for small businesses.
Chapter 12	Family farmers and fishermen	Debt adjustment for qualifying agricultural operations and commercial fishing operations with regular annual income.
Chapter 13	Individuals with regular income	Repayment plan -- the debtor pays creditors over 3 to 5 years through a court-approved plan, then receives a discharge of remaining eligible debts.
Chapter 15	Foreign representatives	Cross-border insolvency -- provides a mechanism for cooperation between U.S. courts and foreign courts in international bankruptcy cases.

For most individuals considering bankruptcy, the choice is between Chapter 7 and Chapter 13.

BAPCPA: The 2005 Reform

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), signed into law on April 20, 2005, was the most significant overhaul of bankruptcy law in decades. It made filing more complex and restricted access to Chapter 7 for higher-income debtors. Key changes include:

• The Means Test (11 U.S.C. § 707(b)): Debtors with income above the state median must pass a formula-based test to qualify for Chapter 7. Those who fail are directed to Chapter 13. See meanstest.org for a detailed breakdown.
• Mandatory Credit Counseling (11 U.S.C. § 109(h)): Debtors must complete a credit counseling course from an approved provider within 180 days before filing, and a financial management course before receiving a discharge.
• Increased Documentation: Filers must provide tax returns, pay stubs, and more detailed financial disclosures than under prior law.
• Repeat Filing Bars (11 U.S.C. § 1328(f)): BAPCPA added waiting periods that bar a discharge if the debtor received a prior discharge within specified time frames -- 4 years for a prior Chapter 7 followed by Chapter 13, and 2 years between Chapter 13 cases. See 1328f.com for a free screening tool.
• Homestead Exemption Limits (11 U.S.C. § 522(p)): Capped the homestead exemption at $189,050 (2024 amount, periodically adjusted) for property acquired within 1,215 days before filing, even in unlimited-exemption states.
• Non-dischargeable Debts Expanded: BAPCPA broadened the categories of debts that cannot be discharged, particularly regarding certain luxury purchases and cash advances before filing.

Key Sections Every Filer Should Know

While the Bankruptcy Code contains hundreds of sections, certain provisions come up in nearly every consumer case:

• Section 109: Eligibility -- who can be a debtor under each chapter. Includes the Section 109(g) filing bars for certain dismissed cases.
• Section 362: The automatic stay -- the instant injunction that stops creditor collection the moment you file.
• Section 506: Determines whether a claim is secured or unsecured based on the value of the collateral. Critical for vehicle loans and mortgages.
• Section 507: Priority claims -- debts that must be paid before general unsecured creditors, including certain taxes, domestic support obligations, and administrative expenses.
• Section 522: Exemptions -- the property you can protect from creditors. Allows states to opt out of federal exemptions. See bankruptcyexemptionsbystate.com.
• Section 523: Non-dischargeable debts -- debts that survive bankruptcy, including most student loans, recent taxes, child support, alimony, and debts obtained through fraud. See 523a.org.
• Section 524: The discharge injunction -- the permanent order that prevents creditors from collecting discharged debts after the case concludes.
• Section 707(b): The means test -- the income-based formula that determines Chapter 7 eligibility.
• Section 727: Chapter 7 discharge -- the conditions under which a discharge can be granted or denied. See 727a8.com.
• Section 1322: Chapter 13 plan contents -- what a repayment plan must and may include.
• Section 1328: Chapter 13 discharge -- including the Section 1328(f) repeat filing bar.

The Federal Rules of Bankruptcy Procedure

In addition to the Bankruptcy Code itself, bankruptcy cases are governed by the Federal Rules of Bankruptcy Procedure (often called the "Bankruptcy Rules"). These rules, promulgated by the Judicial Conference of the United States, establish the procedural framework for filing petitions, serving notices, conducting hearings, and managing cases.

Each of the 94 federal judicial districts also has local bankruptcy rules that supplement the national rules. Local rules vary significantly -- what is required in one district may not be required in another. Always check your local court's rules before filing.

The Federal Rules are periodically updated. Public suggestions for rule changes can be submitted through the Rules Committee of the Judicial Conference.

How States Fit Into Federal Bankruptcy Law

Although bankruptcy is exclusively federal, states influence the process in two important ways:

• Exemption laws: Under 11 U.S.C. § 522(b), states can opt out of the federal exemption scheme and require debtors to use state exemptions instead. Most states have done so. Exemption amounts vary enormously -- from a few thousand dollars to unlimited protection for homesteads in states like Texas and Florida.
• Property law: State law determines property rights, which the bankruptcy court then applies. Whether you own property as joint tenants, tenants by the entirety, or community property depends on state law and can significantly affect what the trustee can reach.

If you moved to a new state recently, be aware of the 730-day rule under 11 U.S.C. § 522(b)(3)(A): you generally must use the exemptions of the state where you lived for the majority of the 730 days before filing.

Frequently Asked Questions About Bankruptcy Laws

What federal law governs bankruptcy in the United States?

The Bankruptcy Code, found in Title 11 of the United States Code (11 U.S.C. §§ 101-1532), governs all bankruptcy proceedings. Congress has exclusive constitutional authority over bankruptcy under Article I, Section 8. The Bankruptcy Code is supplemented by the Federal Rules of Bankruptcy Procedure and local court rules.

What are the different chapters of bankruptcy?

The main chapters are: Chapter 7 (liquidation), Chapter 9 (municipalities), Chapter 11 (reorganization), Chapter 12 (family farmers and fishermen), Chapter 13 (wage earner repayment plans), and Chapter 15 (cross-border cases). Most individuals file under Chapter 7 or Chapter 13.

What did BAPCPA change about bankruptcy law?

BAPCPA (2005) added the means test to limit Chapter 7 access for higher-income debtors, required credit counseling before filing and debtor education before discharge, imposed stricter documentation requirements, capped certain homestead exemptions, and added the Section 1328(f) discharge bar for repeat filers.

Can states make their own bankruptcy laws?

No. Bankruptcy law is exclusively federal. However, states define their own exemption laws (determining what property you can protect), and state property law determines ownership rights that the bankruptcy court applies. Most states have opted out of the federal exemption scheme under 11 U.S.C. § 522(b).

Where can I find the text of the Bankruptcy Code?

The full text of Title 11 is available free at the Cornell Law Institute (LII) and the Office of the Law Revision Counsel. The Federal Rules of Bankruptcy Procedure are available at uscourts.gov.