A legal arrangement involving a person or business that’s unable to repay unsettled debts. The bankruptcy process starts with a petition filed by the debtor (most common) or on behalf of creditors (less common). All of the debtor’s possessions are measured and evaluated, at which point the assets are used to repay a share of outstanding debt. Upon the closure of bankruptcy proceedings, the debtor is reassured of the debt obligations sustained before filing for bankruptcy.

Bankruptcy offers an individual or business a chance to start renewed by pardoning debts that can’t be paid while offering creditors a fortune to obtain some measure of repayment grounded on what assets are available. In concept, the skill to file for bankruptcy can benefit a complete economy by giving publics and businesses another chance and providing creditors with a measure of debt repayment.

Bankruptcy filings in the United States can fall beneath one of several chapters of the Bankruptcy Code, such as Chapter 7 (which involves winding up of assets), Chapter 11 (company or individual reforms) and Chapter 13 (debt repayment with lowered debt contracts or payment plans). Bankruptcy filing provisions vary widely amongst different countries, chief to higher and lower filing charges depending on how easily a person or company can broad the process.