Purpose of Bankruptcy

Bankruptcy is a federal legal process that can help you eliminate or restructure overwhelming financial obligations. The federal Bankruptcy Code is written by Congress and the bankruptcy laws are interpreted by the federal courts. The Supreme Court of the United States of America has interpreted various provisions of the Bankruptcy Code during the past 100+ years.

So what does the Supreme Court have to say about the purpose of bankruptcy?

  • “The principal purpose of the Bankruptcy Code is to grant a ‘fresh start’ to the ‘honest but unfortunate debtor’.” Marrama v. Citizens Bank of Massachusetts, 127 S.Ct. 1105 (2007).
  • “The central purpose of the [Bankruptcy] Code is to provide a procedure by which certain insolvent debtors can reorder their affairs, make peace with their creditors, and enjoy ‘a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.Grogan v. Garner, 111 S.Ct. 654 (1991)
  • “One of the primary purposes of the Bankruptcy Act is to ‘relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes’. This purpose of the act has been again and again emphasized by the courts as being of public as well as private interest, in that it gives to the honest but unfortunate debtor…, a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.” Local Loan Co. v. Hunt, 54 S.Ct. 695 (1934).
  • “It is the purpose of the bankrupt act…to relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes.” Williams v. U.S. Fidelity & Guaranty Co., 35 S.Ct. 289(1915), citing Wetmore v. Markoe, 196 U.S. 68 (1904); Zavelo v. Reeves, 227 U.S. 625 (1913); and Burlingham v. Crouse, 228 U.S. 459 (1913).


The Supreme Court has consistently stated that the bankruptcy laws exist to help the individual get a fresh financial start. Bankruptcy can legally and permanently eliminate debts you cannot pay and restructure your finances for a fresh financial start. Call today and speak with an experienced bankruptcy attorney to learn how bankruptcy can help you.

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