Protect the debtor by giving them a fresh start without creditor claims Ensure fair treatment for creditors competing for a debtor's assets. For some people or companies, unfortunately, bankruptcy is the right choice. If debts become too large to manage, the alternative could be the liquidation of all your assets and legal rulings for non-payment or breach of contract. While it's harmful to your credit and reputation, bankruptcy is a legal channel to avoid the worst of the cases described above.
This confluence of increasing personal bankruptcies in a period of prosperity, an increasingly expensive and dysfunctional Chapter 11 reorganization system, and the macroeconomic competitive pressures of globalization have driven legislative efforts to reform the bankruptcy code. The first permanent federal bankruptcy law was enacted in 1898 and remained in force, with amendments, until it was replaced by a new comprehensive law in 1978, whose essential structure is still in force today.