Protection of Debtor and Creditor Interests.
Bankruptcy was originally for the protection of creditors. It was a structured method for creditors to reclaim their debts instead of sending people to debtor’s prison as was the practice under the British. It has evolved into primarily a debtor’s remedy. It allows the “honest” but “unfortunate debtor” a means to discharge debts and become productive members of society.
Bankruptcy has constitutional and federal statutory authority.
CONSTITUTIONAL AUTHORITY
Article 1, Section 8, Clause 4: Congress shall establish “uniform Laws on the subject of Bankruptcies.” Known as “Bankruptcy Clause.”
FEDERAL STATUTORY LAW
Congress has passed several laws regarding bankruptcy, collectively known “Bankruptcy Code” or “The Code” under Title 11 of the United States Code (“USC”). The Code is supplemented by the Federal Rules of Bankruptcy Procedure (“Bankruptcy Rules”) which incorporate many of the Federal Rules of Civil Procedure.