What Is Bankruptcy?
Bankruptcy is a set of procedures based on federal law and administered by federal bankruptcy courts. The bankruptcy system exists to protect individuals, families and businesses from oppressive indebtedness by allowing them to discharge a wide range of financial obligations. In 1934, the United States Supreme Court described it this way:
One of the primary purposes of the Bankruptcy Act is to relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes…. The purpose of the act has been again and again emphasized by the courts and being of public as well as private interest, in that it gives to the honest but unfortunate debtor… a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.
Local Loan Co. v. Hunt 292 U.S. 234 (1934)
Today, the opportunity for a financial fresh start is more important than ever. Most of us use credit cards and lines of credit to make large purchases or to pay expenses during a temporary loss of income. The “honest debtor” who incurs a debt fully intends to pay the debt. But sometimes, life does work out as planned. Extended periods of unemployment or reduced income, disability, divorce and the loss of a spouse are common reasons for the inability to repay debts. Each of us deserves the opportunity to put misfortunes and mistakes behind us.
