What is bankruptcy?

Bankruptcy is primarily a legal process designed for individuals or businesses that find themselves unable to meet their financial obligations and repay debts. This process provides a way for debtors to seek relief from some or all of their debts, allowing them to get a fresh start financially. It can involve liquidating assets to pay off creditors or restructuring debts in a way that makes them more manageable.

Understanding the implications of bankruptcy is important; it may not only affect one’s credit score but also have long-term impacts on financial opportunities. This legal route is often the last resort for debtors, as it entails legal proceedings and can be complex.

The other choices touch on different aspects of financial management but do not accurately define bankruptcy. For instance, the restructuring of debt payments is a different process that may occur within bankruptcy, but it doesn’t encapsulate what bankruptcy itself is. Similarly, government assistance for failing businesses does not cover the legal intricacies of bankruptcy, which is specifically about debt relief. Finally, financial planning as a service targets long-term wealth management rather than addressing insolvency issues directly associated with bankruptcy.