The Merriam-Webster Dictionary describes bankruptcy as an insolvent person, especially one whose property is turned over by court action to a trustee to be handled for the benefit of his creditors. To say it in other words, bankruptcy is a process established by a set of federal laws that is designed to give debtors a new beginning by cancelling many of their debts through an order of the court.
Creditors may file a bankruptcy petition against a debtor ("involuntary bankruptcy") in an effort to recoup a portion of what they are owed. In the majority of cases, bankruptcy is initiated by the debtor ("voluntary bankruptcy" filed by the bankrupt individual/ organization).
Creditors have to stop any attempt to collect a debt (at least temporarily) when bankruptcy is filed. There is usually immediate relief from creditor pressure, and a bankruptcy can stop a pending foreclosure sale of your home, a garnishment of your wages, or a threatened repossession. Most creditors cannot call, write or sue someone after bankruptcy has been filed.
There are two types of bankruptcy. One is “total bankruptcy,” which stays on the credit report (United States) for 10 years, and the other one is more like a payment plan, and it stays on the credit report for 7 years. However, bankruptcy is for life. In example, loan applications and job applications ask if the applicant has EVER filed bankruptcy. Bankruptcy fraud is a serious crime, and it typically includes concealment of assets, concealment or destruction of documents, conflicts of interest, fraudulent claims, false statements or declarations, and fee fixing or redistribution arrangements. So if someone lies at the question if bankruptcy was ever files, technically criminal fraud just has been committed.