Bankruptcy

Bankruptcy is a federal legal process that gives people and businesses a financial fresh start by reorganizing or discharging overwhelming debts while ensuring creditors are treated fairly (see Bankruptcy: Your Right to a Financial Fresh Start).

How bankruptcy works

Filing a bankruptcy petition begins an automatic stay that halts most collection actions and creates a structured process for sorting claims and payments under the Bankruptcy Code (see Bankruptcy: Your Right to a Financial Fresh Start).

Common chapters

Options include Chapter 7 (liquidation), Chapter 11 (reorganization), Chapter 13 (individual repayment plans), and chapters for specialized situations; each serves different needs and outcomes (see Bankruptcy: Your Right to a Financial Fresh Start).

What to expect

The process requires detailed financial disclosures, possible credit counseling, and court-supervised steps that balance debtor relief with creditors’ rights—helping many obtain a legally recognized chance to rebuild their finances (see Bankruptcy: Your Right to a Financial Fresh Start).

By GovFacts
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