In 1934 the Supreme Court explained what personal bankruptcy is for. In Local Loan Co. v. Hunt, it said that bankruptcy gives “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.”
The federal courts still describe it in the same terms: “Bankruptcy can provide a fresh financial start for consumers who cannot pay their debts…” In 2025, Americans filed 540,603 consumer bankruptcy cases.