What is the primary purpose of bankruptcy?

The primary purpose of bankruptcy is to ensure equality among creditors. This means that when an individual or business files for bankruptcy, the legal process is designed to treat all creditors fairly and equitably in the distribution of any available assets. By doing so, bankruptcy laws aim to create a structured way to address the debts owed, so that creditors receive as much of what they are owed as is possible, given the circumstances and available assets.

The bankruptcy process dictates that creditors are paid based on their priority under the law, leading to an organized liquidation or reorganization of assets and debts. This approach centers on maintaining fairness rather than allowing a chaotic race among creditors to claim assets from a debtor.

While eliminating debts, protecting employee interests, and liquidating assets are aspects that may arise in bankruptcy proceedings, the overarching goal is to ensure that all creditors have a fair opportunity for repayment according to the established rules.