When debts overwhelm income or assets, the law provides an orderly exit. Bankruptcy is a court-supervised process that allows individuals or businesses unable to meet their obligations to obtain relief while treating creditors according to statutory priorities.

Common forms include liquidation, in which non-exempt assets are sold to pay creditors, and reorganization, in which the debtor proposes a plan to repay over time while continuing operations. An automatic stay immediately stops most collection efforts once the case is filed. Certain debts such as many taxes and student loans may survive discharge.

Bankruptcy aims to give honest debtors a fresh start and to maximize fair recovery for creditors. Filing carries long-term credit consequences and public record implications. Trustees and judges oversee the process to prevent abuse and ensure compliance with the code.

• Court process for insolvent debtors
• Includes liquidation and reorganization paths
• Triggers an automatic stay on collections
• Can discharge many but not all debts