8. Bankruptcy Proceedings

Overview The Constitution empowers Congress to establish uniform bankruptcy laws (Article I, Section 8). The concept of a "fresh start" is important to our nation’s economy because it allows people and businesses to take reasonable risks, knowing that if they fail, they will get a second chance and not be forever burdened or pressured by their debts or have to go to “debtor’s prison,” as in the old days.

Bankruptcy is a legal process allowing an individual or business – called a “debtor” – to obtain a fresh start by obtaining relief from most debts. There are six types of bankruptcy cases. The most common are discussed in the materials compiled here. Generally, an eligible debtor may reorganize debts and pay back only a portion of them under a Chapter 11, [12,] or 13 bankruptcy; an eligible debtor may be forgiven most (and many times, all) debts in a Chapter 7 case. In return, the value of a debtor’s non-exempt assets must be distributed to the debtor’s creditors.

Learning Objectives |  Students will be able to: 
  • Understand what "bankruptcy" is 
  • Differentiate the most common types of bankruptcy 
  • Learn what types of debts can be discharged ("wiped out") in the different kinds of bankruptcy cases 
  • Understand how a bankruptcy case proceeds through the court     

Summary of Resources Below is the list of resources gathered in this section.  Click on the titles to learn more. 

Resources |  
  1. Bankruptcy Basics
    • This is a straight-forward, detailed online series of "documents" that provide a clear explanation of bankruptcy, the various "chapters" and their related procedures for use with a high school and older audience.  The documents, together with a series of nine videos on the site walk a viewer through the basics of the processing of filing for bankruptcy are suitable. 
    • Website/documents from the Administrative Office of the U.S. Courts
    • Age: H, A 
  2. What is a Bankruptcy Case?
    • This simple, three-paragraph online document provides a concise explanation of bankruptcy and bankruptcy courts for middle school and older students.  As the opening sentences explain: "A bankruptcy case is a special kind of civil case involving companies or people who can no longer pay their debts. Congress has established special federal courts, called bankruptcy courts, to help decide these cases. Bankruptcy gives these debtors certain protections and sets out steps they must follow to repay creditors."
    • Document from the Federal Judicial Center 
    • Age: M, H, A 

Resources, cont. 
  1. How Bankruptcy Cases Move through Federal Courts
    • This straight-forward, online series of "documents"  provide a clear explanation of the bankruptcy code and procedures  for high school and older students. Each bankruptcy "chapter" begins with a brief explanation of a topic, and then teaches the  steps in a specific bankruptcy process. The interactive website (in a slideshow environment with clickable links) includes clear flow charts for Chapter 7, 11, and 13 cases. 
    • Websites/documents from the Federal Judicial Center 
    • Age: H, A  
  2. Quiz #6:  Bankruptcy
    • This is an online 10-question quiz suitable for high school and older students  that tests those students' understanding of the immediately proceeding bankruptcy readings from the Federal Judicial Center (resource 2 and resource 3 listed here).  An advantage of this particular quiz format is that audiences are able to check their answers before moving on to the next question.  This allows the audience to see what they actually retained from the previous resources — and gives users the correct answers if they guessed wrong. 
    • Game from the Federal Judicial Center 
    • Age: H, A