Bankruptcy represents the legal status of person who cannot repay the debts that the/she owes. A bankruptcy can apply to an individual or a business.
When an individual or business files for bankruptcy, it becomes a legal status and provides protection against creditors. The option to work out a repayment plan may be provided through a bankruptcy court. Types of bankruptcy are referred to by chapters as they relate to the United States Bankruptcy Code. The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter 13. Chapter 7 is the simplest and quickest form of bankruptcy and involves basic liquidation. Chapter 13 is typically for businesses, but individuals with substantial debts can file for this type as well; this usually involves rehabilitation and repayment plans.