Bankruptcy refers to a situation where a person or business is unable to meet its financial obligations and seeks legal protection from its creditor’s claims against them. The process involves the debtor filing a petition with a court established for this purpose. The court then evaluates the debtor’s financial position by placing a value on their current assets and decides what portion of these assets must be used to repay the outstanding debt to creditors.
The process is intended to offer individuals and businesses a new start when their debt burdens overwhelm them while also ensuring that creditors are returned as much of their money as possible. It usually means that the debtor’s finances are subject to the court’s oversight for a period of several years where any amount they earn over a specified limit must be paid to the creditors.