Definition

A legal process for people or businesses that can’t repay debts. It can provide relief but will affect your credit score for several years.

What to consider

  • View it as a serious reset, not a quick fix.
  • Learn how it might affect your credit for years to come.
  • Consider all alternatives before making a final decision.

Real world scenarios

  • Kyle files for bankruptcy when he can no longer keep up with medical bills and credit card debt, seeking a fresh start.
  • Kathy consults an attorney to decide if bankruptcy is her best path or if a debt management plan is more suitable.
  • Regaining control of finances post-bankruptcy teaches Marco to budget carefully and rebuild his credit gradually.

Related terms

Legal & Estate Planning