Bankruptcy Case Law and Legal Definition

Bankruptcy case refers to a proceeding commenced by filing a voluntary or involuntary petition under a bankruptcy statute. Federal courts have exclusive jurisdiction over bankruptcy cases and therefore a bankruptcy case cannot be filed in a state court. Most cases are filed under the three main chapters of the Bankruptcy Code – Chapter 7, Chapter 11, and Chapter 13. Some bankruptcy cases are filed to allow a debtor to reorganize and establish a plan to repay creditors, while other cases involve liquidation of the debtor's property.

A bankruptcy case usually begins when the debtor files a petition with the bankruptcy court. A petition may be filed by an individual, by a husband and wife together, or by a corporation or other entity. It can be voluntary or involuntary. Along with the petition, statements listing assets, income, liabilities, and the names and addresses of all creditors and how much they are owed should also be filed. The filing of the petition automatically stays debt collection actions against the debtor and the debtor's property. As long as the stay remains in force, creditors cannot bring or continue lawsuits, make wage garnishments, or even make telephone calls demanding payment. Creditors are informed by notice from the clerk of court that the debtor has filed a bankruptcy petition.