Definition - What does Bankruptcy mean?
A bankruptcy is a legal case which serves to rearrange or extinguish debts for a person or a company that has fallen behind in payments and is past the point where they could be reasonably expected to repay all debts if the state of their finances were to be considered. Bankruptcy is applicable to a person or company that does not have enough assets to cover their liablilities, and therefore has to seek court relief in order to be forgiven from not paying their debts back at the agreed amount, and within the agreed time frame.
Justipedia explains Bankruptcy
A person or company may choose to file for bankrupty if they are unable to reach any workable solution with creditors regarding rearranging payments for different sums, and longer repayment terms. There are many specifics and conditions that a person has to adhere to in order to successfully file for bankruptcy, but the act itself is protection for the person or company against being sued for outstanding sums by various creditors.