Legal definition of bankruptcy
Personal Bankruptcy Legal Terminology

bankruptcy

1
A legal declaration of financial insolvency.

A legal procedure for dealing with debt problems of individuals and businesses; specifically, a case filed under one of the chapters of title 11 of the United States Code (11 U.S.C. §§ 101– 1330).

A proceeding in a federal court in which an insolvent debtor's assets are liquidated and the debtor is relieved of further liability. Chapter 7 of the Bankruptcy Reform Act deals with liquidation, while Chapter 11 deals with reorganization.

Chapter 7, 11, and 12 bankruptcies remain on your credit report for 10 years after the filing date. When you file for bankruptcy, all the accounts included should be marked as "Included in BK" and will each stay on your report for 7 years.

The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter 13.
Source: The Code of Laws of the United States of America (U.S. Code). website
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