Bankruptcy is a legal process whereby debtors and creditors are able to seek a resolution of a business that is unable to meet its current financial obligations. There are different sections of the Bankruptcy law in the United States, separated into chapters, which govern the procedures by which debtors can wind up their affairs and liquidate or restructuring themselves and their debt. These are commonly referred to as Chapter 7 and Chapter 11 bankruptcy respectively. While federal law governs most of the bankruptcy process, there are also nuances based on State laws. This might involve property exemptions or eligibility requirements themselves. Bankruptcy petitions are filed in Federal bankruptcy courts which are located in various districts depending on which State the debtor resides.
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Bankruptcy is a process whereby a debtor can obtain relief in some way from the financial obligations they owe. There are various types of bankruptcy – some involve complete liquidations – and others involve restructuring or reorganization of debts. The principle and policy behind the bankruptcy system is to get debtors a so-called second chance when a set of rigorous legal requirements are met. Those legal requirements are primarily based on the federal bankruptcy code (with some state law overlap). The underlying goal is to make sure debtors are honest, transparent and qualify for bankruptcy. If so, there is a framework in place to facilitate the process of either discharged debt completely or entering into an approved plan to repay debts on different terms than previously accepted.