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A legal proceeding involving a person or small business which is unable to repay outstanding debts. The bankruptcy process starts with a petition filed by the debtor (most common) or on behalf of creditors (less common). All of the debtor's assets are measured and evaluated, whereupon the assets are used to pay back some of outstanding debt. Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred prior to filing for bankruptcy. 

Bankruptcy laws assist people to who can no more pay their creditors get a fresh start - by liquidating assets to pay their debts or by creating a repayment plan. Bankruptcy laws also protect struggling firms and provide for orderly distributions to business creditors through reorganization or liquidation. In theory, the ability to file for bankruptcy may benefit an overall economy by giving individuals and companies one more opportunity and providing creditors with a measure of debt repayment.  

Bankruptcy filings in the United States can fall under one of many chapters of the Bankruptcy Code, such as Chapter 7 (which involves liquidation of assets), Chapter 11 (company or individual &quot;reorganizations&quot;) and Chapter 13 (debt repayment with reduced debt covenants or payment plans). Bankruptcy filing specifications vary widely between different nations, resulting in higher and lower filing rates depending on how easily an individual or business can complete the procedure. 

Bankruptcy in the United States is a issue placed under Federal jurisdiction by the United States Constitution (in Article 1, Section 8, Clause 4), which allows Congress to enact &quot;uniform laws on the subject of bankruptcies throughout the United States&quot;. The Congress has enacted statutes governing bankruptcy, mainly in the form of the Bankruptcy Code, found at Title 11 of the United States Code. Federal law is amplified by state law in some places where Federal law fails to speak or expressly defers to state law.
 
While bankruptcy cases are usually filed in United States Bankruptcy Court (an adjunct to the U.S. District Courts), bankruptcy cases, specifically based on the validity of claims and exemptions, are usually based upon State law. State law therefore plays a major role in many bankruptcy cases, and it is often not possible to generalise [http://www.chillicious.com/finance/selecting-the-right-bankruptcy-attorney/ bankruptcy] law across state lines.
 
Commonly, a debtor declares bankruptcy to obtain relief from debt, and this is accomplished either through a discharge of the debt or through a restructuring of the debt. Generally, when a debtor files a voluntary petition, his or her [http://www.chillicious.com/finance/understanding-credit-card-bankruptcy/ bankruptcy] case commences.

The purpose of bankruptcy is two-fold: 

(1) to give the debtor (the party filing bankruptcy) a fresh start and 

(2) to pay creditors in an orderly fashion. [http://www.chillicious.com/debt-consolidation/what-you-should-know-about-bankruptcy/ Bankruptcy] is governed by federal law which often trumps state law when it comes to the actions of both the debtor and creditors.