What is the meaning of bankruptcy?

Bankruptcy stands for legal process against a person or an organization when the latter are unable to honour their financial obligations or pay back their outstanding debts. The firm or the debtor files a petition in the court and all the outstanding debts are measured and evaluated. Further, the assets of the debtor are used to pay a portion of the debt.

It provides a second chance to the business or person, as the latter is freed from its debt obligations. All the debts which are unpaid to the creditors completely are usually forgiven. The filing of bankruptcy varies in different countries. The filing of bankruptcy varies in different countries.

If a firm declares bankruptcy in India, it will hurt its credit rating permanently and it will become very hard to seek a new loan although it will be saved from financial trouble.