Bankruptcy helps people who can no longer pay their debts get a fresh start by liquidating assets to pay their debts or by creating a repayment plan. Bankruptcy laws also protect financially troubled businesses.
Bankruptcy law provides for the reduction or elimination of certain debts, and can provide a timeline for the repayment of nondischargeable debts over time. It also permits individuals and organizations to repay secured debt--typically debt with real estate or personal property like vehicles pledged as collateral--often on terms more favorable to the debtor.
Federal bankruptcy law is contained in Title 11 of the U.S. Code. Congress passed the Bankruptcy Code under its constitutional grant of authority to "establish... uniform laws on the subject of Bankruptcy throughout the United States." See U.S. Constitution Article I, Section 8. States may not regulate bankruptcy, but they may pass laws that govern other aspects of the relationship between the debtor and creditor. A number of sections of Title 11 incorporate the debtor-creditor law of the individual States.
Bankruptcy proceedings are supervised by and litigated in Bankruptcy Court, which is part of the Federal District Court system. Congress established the U.S. Trustee Program to oversee the administration of bankruptcy proceedings, and authorized the U.S. Supreme Court to promulgate the Federal Rules of Bankruptcy Procedure.