What is a Bankruptcy? - Definition

What is a Bankruptcy? - Definition
A Bankruptcy is a legal proceeding that alleviates an individual/entity of his or her debt when the individual is no longer able to make payment on their debts. There are several different types of bankruptcies.

The most common for individuals are either a Chapter 13 Bankruptcy, or a Chapter 7 Bankruptcy. In a Chapter 13 the individual is put on a payment plan that is usually monitored by a trustee. In a Chapter 7 the debt is erased. A Bankruptcy has a negative impact on an individual's credit, and can make transactions that involve borrowing money difficult.