Bankruptcy is a legal process that helps an individual or a business entity to get rid of the debts they are unable to pay back. It is a state of financial ruin where the debtor is no longer able to meet their financial obligations and they have no other means to pay back the creditors.
Bankruptcy commenced through a court procedure where the debtor files a petition to seek relief from their debts. The court appoints a trustee who reviews the debtor's assets and liabilities. If assets are found, the trustee will sell them to pay off the creditors.
There are different types of bankruptcies such as Chapter 7, Chapter 11, and Chapter 13, each with its own set of rules and regulations.
After filing for bankruptcy, the debtor may face some long-term consequences, such as damage to their credit history, difficulty in obtaining loans, and difficulty in renting a home or getting hired for a job.
Although bankruptcy holds a negative connotation, it provides a fresh financial start for individuals or businesses facing unmanageable debt.
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