Bankruptcy refers to a situation where a person or business is unable to repay their outstanding debts. It usually starts from a petition filed either by the debtor (the one who owes the debt) or on behalf of creditors (the other side who asks for the debt).
In most cases, it is the debtors that file the petition, because through filing for bankruptcy they may get a chance to start fresh. Specifically, the debtor’s assets, after being measured and evaluated, would be used to repay a part of outstanding debt. Even if the debtor’s assets cannot cover all the debts they owe, the remaining debts will be forgiven due to bankruptcy.
Only people with outstanding debt could and would like to file a bankruptcy. After you file for bankruptcy, you will get an “automatic stay”. It means your debt is block and the creditors can no longer collect your debts. So the creditors will not be able to deduct money from your bank account or take away your secured assets.
That might sound good, but filing bankruptcy is no quick fix to escape from your debts. Bankruptcy is a serious business and it is only handled in federal courts. And you shall meet the rules stated in the U.S. Bankruptcy Code. The types of bankruptcy are usually referred to by their chapter in the U.S. Bankruptcy Code. Since each chapter has lots of requirements and rules, you need to meet all these requirements before filing for a bankruptcy. Besides, although bankruptcy can allow you a fresh start, the record of bankruptcy will negatively impact your credit history for a number of years. This means it will be difficult for you to borrow money or open new lines of credit card in the future.