1. What is Bankruptcy?
Bankruptcy, or insolvency as it is otherwise known, is a legal declaration of an inability or an impairment to pay for the debts owed to creditors. To put it simply, it is an option that debtors and creditors have whenever an individual cannot pay his debts when they fall due.
Bankruptcy happens when a person or a business is unable to repay their existing debts, which is a very reasonable option for those in debt. The process starts once the debtor or creditor filed a petition. However, a bankruptcy will damage your credit like nothing else and it remains on your record 5 or more years, which means it is still affecting your credit five years from now when you want to purchase a new house.