Bankruptcy law provides for the development of a plan that
allows a debtor, who is unable to pay his creditors, to resolve his
debts through the division of his assets among his creditors. This
supervised division also allows the interests of all creditors to be
treated with some measure of equality. Certain bankruptcy proceedings
allow a debtor to stay in business and use revenue generated to resolve
his or her debts. An additional purpose of bankruptcy law is to allow
certain debtors to free themselves (to be discharged) of the financial
obligations they have accumulated, after their assets are distributed,
even if their debts have not been paid in full.
Bankruptcy law is federal
statutory law contained in Title 11 of the United States Code. Congress
passed the Bankruptcy Code under its Constitutional grant of authority
to "establish. . . uniform laws on the subject of
Bankruptcy throughout the United States."States may not regulate bankruptcy
though they may pass laws that govern other aspects of the debtor-creditor
relationship. A number of sections of Title 11 incorporate the debtor-creditor
law of the individual states.
Bankruptcy proceedings are supervised
by and litigated in the United States Bankruptcy Courts. These courts
are a part of the District Courts of The United States. The United
States Trustees were established by Congress to handle many of the
supervisory and administrative duties of bankruptcy proceedings. Proceedings
in bankruptcy courts are governed by the Bankruptcy Rules which were
promulgated by the Supreme Court under the authority of Congress.
