Bankruptcy refers to laws available to debtors who cannot meet their obligations to creditors. Federal courts have exclusive jurisdiction over bankruptcy cases, which means that a bankruptcy case cannot be filed in a state court.
The primary purposes of the laws of bankruptcy are:
- to give an honest debtor a “fresh start” in life by relieving the debtor of most debts
- to repay creditors in an orderly manner to the extent that the debtor has property available for payment
The bankruptcy process is relatively complex and requires the counsel of specialized attorneys who typically focus their practices on either personal bankruptcy (for individual debtors) or business bankruptcy (for business entities in financial duress). As this legal guide is created for hospitality business owners, operators, and managers, it emphasizes the most used forms of business bankruptcy. There are two categories of bankruptcy: liquidation and reorganization.