What is bankruptcy?

Bankruptcy is a legal term used to describe people who have accumulated so much debt that they cannot pay their creditors. When a person becomes bankrupt, he/she may initiate a legal proceeding in court so that the person can be declared bankrupt. An advantage to filing for bankruptcy is that once a court declares a person bankrupt, it might also discharge a person’s debt. If debt to certain creditors is discharged, those creditors may no longer attempt to collect money for those debts. However, a significant disadvantage to filing for bankruptcy is that it can very negatively affect the filer’s credit score and ability to secure credit for many years. 

For more information, see: 11 U.S.C. § 101-112 (2015); National Consumer Law Center, Surviving Debt: A Guide for Consumers (5th ed. 2005); James W. Martin, Jr., Bankruptcy, in The West Virginia Practice Handbook Vol. 1 (The West Virginia State Bar, Young Lawyers’ Division, 4th ed. 1996).