Definition:
The legal declaration of financial insolvency. Declaring bankruptcy means that you are unable to pay your debts and that you want the legal system to absolve you from responsibility for paying some or all of the remaining balances. Bankruptcy very negatively affects your credit for at least 7-10 years and should therefore only be seen as a last resort if you cannot pay your debts and you have no recourse for lessening the burden. In business, the ownership of a bankrupt entity's assets is transferred from stockholders to bondholders. Bankruptcy declarations are handled differently according to the type of entity declaring itself bankrupt: see Chapter 7, Chapter 11, Chapter 12, Chapter 13.
