What Is Bankruptcy?

For individuals facing financial difficulties, bankruptcy may offer a path to finding relief from overwhelming debt. However, there are different kinds of bankruptcies and some are available only in specific circumstances. Bankruptcy is the process whereby a person legally declares himself or his business unable to pay outstanding debts. Depending upon the type filed, one meets with a judge to determine a payment schedule or have a legal bankruptcy discharge most if not all debts. Businesses also may declare bankruptcy, which either means the business will close, or that the business will continue to operate with reduced payments to debtors. This section includes information on the basics of bankruptcy, the differences between Chapter 7 and Chapter 13 bankruptcy, the benefits and limits of each, and answers to common questions about bankruptcies.