legal framework for bankruptcy

The legal framework for bankruptcy provides individuals and businesses with a structured process to resolve overwhelming debt while protecting certain rights. It is governed by federal laws, primarily the Bankruptcy Code, which outlines different types of bankruptcy filings (like Chapter 7, 11, or 13) suited to specific financial situations. These laws establish procedures for debt discharge, asset liquidation or reorganization, and fair treatment of creditors. The goal is to give borrowers a fresh start while ensuring creditors are treated fairly. Courts oversee these proceedings to ensure compliance and equitable resolution.