The term bankruptcy comes from two Latin words meaning “bench” and “break”; thus, its literal meaning is “broken bench.” Bankruptcy is the status of people or other entities that are under a heavy debt burden and unable to repay their debts. Bankruptcy is determined by a court decision. The declaration of bankruptcy initiates enforcement proceedings against the debtor in the event of the debtor’s failure to fulfill the obligation to repay. Bankruptcy is a serious matter, and at best, both sides lose. The creditors lose much of the money they are owed, and the debtors lose some of the respect they previously had.

Declaring bankruptcy is generally considered as the last resort when dealing with financial problems. Because of its long-term negative impact on creditworthiness, it ...

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