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Bankruptcy law encompasses both business and personal bankruptcies. Bankruptcy proceedings are governed by the Unites State Bankruptcy Act and all bankruptcy matters are heard in federal bankruptcy court. Bankruptcy proceedings Bankruptcy proceedings can begin either involuntarily or voluntary. Typically a person or entity will voluntarily enter into bankruptcy proceedings in order to eliminate overwhelming debt. If a person or entity is in horrific debt and is not resolving their financial issues, creditors can initiate the bankruptcy proceedings. Once the proceeding is initiated, the Bankruptcy Act ensures creditors that they will all be treated equally and that a select creditor will not receive special preferential treatment. During the proceeding, the court will liquidate the assets of the debtor to pay the amount owed to the creditors. Not all of the debtor's assets will be liquefied. A debtor is allowed to keep certain items that allow him to live and maintain an income. Furthermore, some debts are not discharged in bankruptcy court. These include payments owed for taxes and child support. Chapter 7 Liquidations A chapter 7 liquidation can be initiated when an individual or corporation does not foresee any financial recovery. In these situations, a trustee will collect all the assets of the debtor and liquidate them to pay the creditors for whatever amounts are owed. The creditors' claims are paid in order of priority. If it is a corporation that is going through liquidation, at the end of the proceeding it will no longer be in business. Continued... By Delinda Tamagni