Bankruptcy is the process by which individuals and businesses may obtain relief from debts they are unable to pay.

Individuals, businesses, towns, and other entities may file for bankruptcy. Not all debtors who wish to file for bankruptcy will qualify.

There are several chapters under the United States Bankruptcy Code under which a debtor may file for bankruptcy. Some chapters provide for bankruptcies of individuals, others of businesses or other entities.

Sometimes a person will make too much money to qualify to file a bankruptcy under chapter 7 of the Bankruptcy Code. That same person may qualify to file bankruptcy under another chapter of the Bankruptcy Code, however, such as chapter 13.

There will be different effects of a bankruptcy, however, under different chapters.

Goal of Bankruptcy

The ultimate goal of an individual debtor through bankruptcy may be complete discharge, or it may be the creation of a viable payment plan over a period of years in which to repay debt. It may be a combination of these two options.

The goal of a corporation or other business through bankruptcy may be to continue to conduct business while repaying debts pursuant to a reasonable repayment plan under which the business is able to survive.

Bankruptcy Rules

The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the “Bankruptcy Rules”) and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases.

The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses.

Bankruptcy Courts

There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country.

The bankruptcy courts generally have their own clerk’s offices.

The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court.

The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts. Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse.

Bankruptcy Trustee

In cases under chapters 7, 12, or 13, and sometimes in chapter 11 cases, this administrative process is carried out by a trustee who is appointed to oversee the case.