What is Bankruptcy ?

Bankruptcy is a legal proceeding involving a person or business that is unable to repay their outstanding debts. The bankruptcy process begins with a petition filed by the debtor, which is most common, or on behalf of creditors, which is less common. All of the debtor's assets are measured and evaluated, and the assets may be used to repay a portion of the outstanding debt. Key Takeaways  Bankruptcy is a legal proceeding carried out to allow individuals or businesses freedom from their debts, while simultaneously providing creditors an opportunity for repayment.  Bankruptcy is handled in federal courts, and rules are outlined in the U.S. Bankruptcy Code.1  There are various types of bankruptcy, commonly referred to by their chapter within the U.S. Bankruptcy Code.2  Bankruptcy can allow you a fresh start, but it will stay on your credit reports for a number of years and make it difficult to borrow in the future.