Understanding Bankruptcy
Bankruptcy is a legal process that individuals or businesses can use to seek relief from their debts when they are unable to repay them. It is a last resort for those who have exhausted all other options.
Types of Bankruptcy
- Chapter 7: Liquidation of assets to pay off debts
- Chapter 13: Repayment plan for individuals
- Chapter 11: Reorganization for businesses
Effects of Bankruptcy
Declaring bankruptcy can have long-lasting consequences on one’s credit score, ability to borrow money, and even future job prospects. It is important to understand the implications before making this decision.
Case Studies
For example, in 2008, the financial crisis led to a surge in bankruptcy filings by individuals and businesses. Companies like Lehman Brothers and General Motors declared bankruptcy, leading to widespread job losses and economic downturn.
Statistics
According to the American Bankruptcy Institute, there were over 750,000 bankruptcy filings in the United States in 2019. This shows the prevalence of bankruptcy as a solution for those in financial distress.
