Bankruptcy is a legal process handled by federal law. This type of law allows businesses and individuals to legally restructure, reduce, or completely wipe out their debts. However, they must a number of strcit requirements. Bankruptcy cases are heard in specialized federal couts which are called bankruptcy courts. Every individual state has at lest one bankruptcy court that is part of the U.S. district court system. While bankruptcy laws are federally mandated each state has it's own specific laws which, identify specific property exemptions. The person filing bankruptcy may choose to use federal or state exemption rules. For businesses wanting to file for bankruptcy under Chapter 7 this is doable however, if you want to stay in business you will need to reorganize your debts and any income must be paid to your creditors. This is possible through Chapter 11.