Bankruptcy Definition, according to Merriam-Webster dictionary: “a condition of financial failure caused by not having the money that you need to pay your debts”.
Purpose of Bankruptcy: to give the debtor a fresh start by eliminating debts AND fairly pay creditors the debts they are owed.
Bankruptcy Limitations: you must pass the Means Test in order to qualify for Chapter 7 bankruptcy. This test determines if your income is low enough to get most of your debts discharged. For Chapter 13 bankruptcy, there is a limitation of how much secured and unsecured debt you may possess.
Advantages of Bankruptcy: filing for bankruptcy allows you, the debtor, to restructure and eliminate your debt and get a fresh start with your finances.
Consequences of Bankruptcy: bankruptcy severely damages your credit score and remains on your record for up to 10 years, making it difficult for you to take out new loans and possibly obtain good employment.
Who May File For Bankruptcy: individuals, business entities, municipalities. Some states can file for bankruptcy, but there are limitations and conditions.
Famous People and Companies Who Filed for Bankruptcy: 50 Cent, Betsy Johnson, Heidi Montag & Spencer Pratt, SkyMall Magazine, Caesar’s Palace, Hostess, Wet Seal, DEB Shops, Delia’s.