Each year, thousands of businesses in the United States file for bankruptcy. The reasons vary. In some cases, the bankruptcy process provides an opportunity to “turn back the clock” and reorganize the enterprise for a more economically feasible future. In other cases, bankruptcy is a way to take what remains of a failing enterprise and distribute its remaining assets to its creditors. Whatever the case, the United States has a legal process that defines the steps that an enterprise, and its creditors, must take once an entity has filed for bankruptcy. The laws are designed to protect both parties in a structured, orderly manner.
Bankruptcy law in the United States was codified under federal law in 1978 under Title 11 of the United States Code (referred to herein as the "Bankruptcy Code"), which provides a uniform federal law governing all bankruptcy cases. Prior to that, bankruptcy law was a mix of state and federal laws, each prescribing different treatments for the debtor and its stakeholders.
This chapter provides a high-level summary of the bankruptcy process.
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