The United States Constitution empowers Congress to establish uniform bankruptcy laws throughout the country. Our founding fathers understood that persons burdened by overwhelming debt sometimes need a fresh financial start in order to reestablish productive lives unimpaired by their past financial crises. A person mired deep in financial turmoil should consider using bankruptcy to achieve such a fresh start.
The federal bankruptcy laws were enacted to provide debtors with an opportunity for a fresh start and to provide creditors with an orderly, equitable means of allocating the debtor's limited resources amongst them. Bankruptcy helps debtors overcome the kind of permanent discouragement that can prevent them from ever getting back on their feet again after falling into financial crisis. Also, bankruptcy aids creditors by prioritizing their claims and distributing debtor assets according to established rules that administer equitable treatment to all creditors.
This discussion is intended only to briefly review the types of bankruptcy filings and what bankruptcy filings can and cannot do. Anyone considering this course of action is encouraged to seek the advice and assistance of an attorney experienced in bankruptcy law.