A legal proceeding regarding a person or small business which is unable to repay unpaid debts. The bankruptcy process begins with a petition filed by the debtor (most common) or on behalf of creditors (less common). All of the debtor's property 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 from the debt obligations incurred before filing for bankruptcy.  

Bankruptcy laws help people who can no more pay their creditors get a fresh start - by liquidating assets to pay their debts or by building a repayment plan. Bankruptcy laws also safeguard troubled companies and provide for orderly distributions to business creditors by way of reorganization or liquidation. Theoretically, the capability to file for bankruptcy can benefit an overall economy by giving individuals and companies another opportunity and offering 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 (that involves liquidation of assets), Chapter 11 (company or individual "reorganizations") and Chapter 13 (debt repayment with lowered debt covenants or payment plans). Bankruptcy filing specifications vary widely between various countries, resulting in higher and lower filing rates depending on how easily a person or company can finish the procedure.  

Bankruptcy in the United States is a matter placed under Federal jurisdiction by the United States Constitution (in Article 1, Section 8, Clause 4), which allows Congress to enact "uniform laws on the subject of bankruptcies throughout the United States". The Congress has enacted statutes governing bankruptcy, primarily 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 specifically defers to state laws.

While bankruptcy cases are always filed in United States Bankruptcy Court (an adjunct to the U.S. District Courts), bankruptcy cases, particularly based on the validity of claims and exemptions, are often based upon State law. State law therefore performs a significant role in several bankruptcy cases, and it is often impossible to generalise [http://www.chillicious.com/finance/selecting-the-right-bankruptcy-attorney/ bankruptcy] law across state lines.

Commonly, a debtor declares bankruptcy to get relief from debt, and this is accomplished either through a discharge of the debt or even 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.

(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 usually trumps state law when it comes to the actions of both the debtor and creditors.