A legal process that provides relief to individuals or businesses unable to pay their debts, either through liquidation of assets (Chapter 7) or reorganization of debt payments (Chapter 11 or 13). It balances debtor relief with creditor rights.
From Italian 'banca rotta' meaning 'broken bench,' referring to medieval Italian moneylenders whose benches were broken when they became insolvent. The legal framework developed to provide orderly debt resolution while preventing debtors' prisons and giving people a 'fresh start.'
Bankruptcy literally comes from breaking the bench of failed Italian bankers - talk about dramatic workplace consequences! The brilliant legal concept is the 'automatic stay' which immediately stops all collection actions the moment bankruptcy is filed, giving debtors breathing room to reorganize their finances without harassment.
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