Bankruptcy is a state derived from the word, bankrupt. A person or an entity can be declared legally Bankrupt when they are unable to repay the debts owed to its creditors.
Bankruptcy declared by Court
Usually a court declares the person or entity as Bankrupt, upon verifying the assets associated with the entity. Court will look into this situation when a petition is filed by the debtor. On filing of the petition, the court measures the assets of the debtor and they are used to pay the creditors, whatever, that can be paid off.
Relief from Court matters
Inspite of having a negative side, bankruptcy can be looked upon as a brighter side too. This is because, debtor is relieved of the debts and creditors get a portion of their outstanding debt. Further, a debtor does not have to deal with the creditors himself, as a public official is appointed.
He takes care of the creditors and sells off your property to pay back the debts. Anybody, whether an individual or an organization can file for bankruptcy. There is no minimum requirement for someone to opt for bankruptcy. If a person’s unsecured debt is more than their assets, then they could file a petition to court. Unsecured debt would constitute credit cards, personal loan.
