Bankruptcy is a process established by a set of federal laws that is designed to give debtors a fresh start by canceling many of their debts through an order of the court.

Bankruptcy also allows creditors who are owed money a chance to get their designated share of any money the debtors can afford to, or are obligated to, pay back.

When a bankruptcy is filed, creditors have to stop any attempt to collect a debt, at least temporarily. There is usually immediate relief from creditor pressure, and a bankruptcy can stop a pending foreclosure sale of your home, garnishment of your wages, or a threatened repossession. Most creditors cannot call, write or sue you after you have filed bankruptcy.

Bankruptcy laws also protect troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation. These procedures are covered under Title 11 of the United States Code (the Bankruptcy Code). The vast majority of cases are filed under the three main chapters of the Bankruptcy Code, which are Chapter 7, Chapter 11, and Chapter 13.