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Bankruptcy refers to the filing of a petition with the US Bankruptcy Court by a company or an individual to declare that such company or individual is unable to repay its debt obligations. Bankruptcy rights and obligations are outlined in Title 11 of the United States Code (i.e. the Bankruptcy Code), and is amended from time to time. In the majority of cases, a bankruptcy is voluntary and filed by the debtor. In the less common cases of an involuntary bankruptcy, it is the creditor that initiates the bankruptcy to collect what is owed. Bankruptcy can be declared under various chapters of the US Bankruptcy Code but most bankruptcies are filed under Chapter 7, Chapter 11, or Chapter 13. In a Chapter 11 bankruptcy, typically reserve for companies but also for individuals with a lot of assets, the bankrupt company will outline a reorganization plan and show how it plans on repaying its creditors while remaining in business. In a Chapter 13 bankruptcy, the debtor, typically an individual with a steady income, will outline a repayment plan with a timeline which will allow such debtor to keep his assets while repaying its debt based on expected future earnings. Unlike with a Chapter 11 bankruptcy or a Chapter 13 bankruptcy where the debtor can keep his assets, a Chapter 7 bankruptcy requires liquidation of a debtor assets for distribution to creditors. As authorized by the Article 1, Section 8, Clause 4 of the Constitution, Congress has enacted several amendments to the US Bankruptcy Code over the years. The two major amendments in recent decades were the US Bankruptcy Reform Act of 1978 and most recently the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 which, among other things, establishes tighter requirements to file a Chapter 7 or Chapter 11 bankruptcy.

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