Personal bankruptcy law allows, in certain

jurisdiction Jurisdiction (from Latin 'law' + 'declaration') is the legal term for the legal authority granted to a legal entity to enact justice. In federations like the United States, areas of jurisdiction apply to local, state, and federal levels. Jur ...

s, an

individual An individual is that which exists as a distinct entity. Individuality (or self-hood) is the state or quality of being an individual; particularly (in the case of humans) of being a person unique from other people and possessing one's own Maslow ...

to be declared

bankrupt Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debt ...

. Virtually every country with a modern

legal Law is a set of rules that are created and are enforceable by social or governmental institutions to regulate behavior,Robertson, ''Crimes against humanity'', 90. with its precise definition a matter of longstanding debate. It has been vario ...

system features some form of debt relief for individuals. Personal bankruptcy is distinguished from corporate bankruptcy.

By country

The DICE report 2006 of Munich's ifo Economic Research compared international personal bankruptcy in selected OECD-countries.

United States

In the United States, the same chapters of the Bankruptcy Code are applied in both personal and corporate bankruptcies. Most individuals who enter bankruptcy do so under

Chapter 13 Title 11 of the United States Code sets forth the statutes governing the various types of relief for bankruptcy in the United States. Chapter 13 of the United States Bankruptcy Code provides an individual with the opportunity to propose a plan o ...

(a "reorganization" plan) or Chapter 7 (a "liquidation" of debtor's assets). More rarely, personal bankruptcy proceedings are carried out under

Chapter 11 Chapter 11 of the United States Bankruptcy Code (Title 11 of the United States Code) permits reorganization under the bankruptcy laws of the United States. Such reorganization, known as Chapter 11 bankruptcy, is available to every business, wheth ...

. The ultimate goal of personal bankruptcy, from the viewpoint of the debtor, is receiving a discharge.

Canada

The concept behind

bankruptcy in Canada The Parliament of Canada has exclusive jurisdiction to regulate matters relating to bankruptcy and insolvency, by virtue of Section 91(2) of the Constitution Act, 1867. It has passed the following statutes as a result: :* The ''Bankruptcy and Ins ...

is that an individual assigns (surrender) everything they own to a

trustee in bankruptcy A trustee in bankruptcy is an entity, often an individual, in charge of administering a bankruptcy estate. Canada In Canada, a licensed insolvency trustee (LIT) is an individual or a corporation licensed by the official superintendent to hold ...

in exchange for the elimination of their

unsecured debts In finance, unsecured debt refers to any type of debt or general obligation that is not protected by a guarantor, or collateralized by a lien on specific assets of the borrower in the case of a bankruptcy or liquidation or failure to meet the t ...

. The rules for filing personal bankruptcy in each province and territory differ slightly. In some areas of Canada individuals may be permitted to keep (exempt) certain property. Common items for exemption include clothing, furniture, appliances, motor vehicles, medical and dental aids, a home, family

heirloom In popular usage, an heirloom is something that has been passed down for generations through family members. Examples are a Family Bible, antiques, weapons or jewellery. The term originated with the historical principle of an heirloom in En ...

s, and some insurance. In basic terms, any property the debtor might require to survive can be exempt. Personal Bankruptcy will eliminate most, if not all, of an individual’s debt, but it also impacts their future ability to obtain credit. The cost of personal bankruptcy in Canada depends on the individual’s monthly family income, the size of the family, and their assets (such as RRSPs). An alternative to personal bankruptcy (in Canada) is a Consumer Proposal. Another option in Canada is a debt consolidation. No matter what option they choose, they can often turn to a trustee in bankruptcy for a free consultation.

Israel

Personal bankruptcy in Israel is governed by the Insolvency and Rehabilitation Law, 2018. Insolvency proceedings below NIS150,000 will be administered entirely by the Enforcement and Collection Authority. Insolvency proceedings above NIS150,000 will be conducted before the official receiver (the Insolvency Commissioner) and, if relevant, before the court with respect to further, more specific matters. Simultaneously, with the issue of the order for the commencement of insolvency proceedings, the Insolvency Commissioner shall appoint a trustee for the debtor and an audit will be carried out, in which the debtor’s economic capability and his conduct will be examined (lasting approximately 12 months).At the end of this audit a payment plan is established, at the end of which the debtor will receive a discharge. The default scenario is a payment period of three years, however, the court reserves the right to increase or decrease the period depending upon the circumstances of the case. If the debtor has no proven financial ability to pay the creditors, he may be granted an immediate discharge. Since 1996, Israeli personal bankruptcy law has shifted to a relatively debtor-friendly regime, not unlike the American model.

References

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