Bankruptcy Basics: A Primer (CRS Report for Congress)
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| Release Date |
Revised Oct. 12, 2022 |
| Report Number |
R45137 |
| Report Type |
Report |
| Authors |
Lewis, Kevin M. |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
U.S. bankruptcy law has two central aims. First, bankruptcy law seeks to relieve debtors of
certain obligations they are unable to repay by providing them with a “fresh start” from financial
difficulties. At the same time, bankruptcy law attempts to preserve the countervailing interests of
creditors and other stakeholders by maximizing total creditor return in an orderly and efficient
fashion. Congress and the courts have established a complex system of statutes, procedural rules,
and judicial precedents intended to balance these competing interests.
Various types of debtors—from individual consumers with modest incomes to the largest
multinational corporations—may potentially encounter difficulty repaying their debts. To
accommodate the differing needs of such debtors, the Bankruptcy Code—which is the primary
source of bankruptcy law in the United States—contains a variety of “Chapters” which create
several different forms of bankruptcy proceedings. Although the end goal of each of those
proceedings is to balance the conflicting interests of debtors, creditors, and other stakeholders,
each Chapter has its own procedures, eligibility requirements, and forms of relief. Whereas some
Chapters aim to liquidate the debtor, others attempt to reorganize the debtor so that it may
continue to operate as a going concern, while still others adjust the debtor’s debts.
This report serves as a primer for Members and their staffs on the basics of U.S. bankruptcy law.
The report provides a brief overview of the most essential concepts necessary for an informed
understanding of the U.S. bankruptcy system, including
the competing policies underlying the Bankruptcy Code;
the sources of bankruptcy law;
the organization of the Bankruptcy Code;
the key players in a bankruptcy proceeding;
the initiation of a bankruptcy case;
the “automatic stay” of creditor actions against the debtor;
the various types of proceedings established by different Chapters of the
Bankruptcy Code, as well as the differences between those proceedings; and
the “discharge” of debt.
