When people fall into a circumstance wherein they can no longer pay for their debts, filing for bankruptcy provides them with a fresh start.  This means that the assets that a person has are liquidated to pay for their debts.  It can also mean that a repayment plan will be made.  The laws for bankruptcy help people to get this fresh start as well as protect businesses who are undergoing financial trouble.

Under the bankruptcy law, the main chapters for the bankruptcy code are chapter 7, chapter 11 , chapter 12 and chapter 13.  Exclusive jurisdiction for bankruptcy cases are held by the federal courts.  The United States Bankruptcy Courts handle, supervise and litigate the proceedings.  The most common type of proceeding is chapter 7.  This involves liquidation of assets and therefore the appointment of a person, a trustee who collects the property of the debtor.  These things are nonexempt and can be sold.

The proceeds will then be distributed evenly to the creditors.  The other chapters for bankruptcy involve the rehabilitation of the person who owes his creditors.  This gives him the power to use future earnings as payment for their debts.  Under bankruptcy law, there is always a trustee to supervise the property and assets that a debtor has.

Laws under bankruptcy state that proceedings can be entered into by the debtor voluntarily or by initiation of the creditors.  During this time, filing for bankruptcy happens and here, the creditors are supposed to stop all efforts of collecting from the debtor.  If the debt is discharged, it means that the debtor no longer needs to pay for it.