Bankruptcy Law is an United States federal law which provides for the development of a plan between a debtor who is unable to resolve their debts and the creditors. Bankruptcy proceedings are supervised and litigated by the United States Bankruptcy Courts and in the most cases involve the appointment of a trustee who collects the non-exempt property of the debtor, sells it and distributes the revenues of it to the creditors. This is called liquidation.

Creditors are not allowed to seek collection of their debts outside of the legal court proceedings and the debtor is not to transfer property that is part of the estate which is a subject of these proceedings.

Except liquidation, Bankruptcy Law provides for another way of legal proceedings which consider rehabilitation for the debtor that to allow them to pay the creditors after certain time. In this case it is a common practice that debtors are left with some of their assets: home, a car, certain household goods that the debtor will be in need of to better recover and pay off the debt - it is considered that in this way debtors are better able to emerge as productive members of society.

Bankruptcy Law also expands the responsibility of the United States Trustees Program including: supervision of random and targeted audits, certification of entities to provide credit counseling that the individuals must receive before filing for bankruptcy, certification of entities that provide financial education to individuals before being discharged from debt, and greater oversight of small business reorganization cases.

The purpose of the modern Bankruptcy Law is to allow debtors to have "fresh start" after the end of the lawful proceedings and at the same time to assure that creditors are repaid.