Bankruptcy is a financial state where an entity becomes insolvent or cannot pay its debts when they are due to its creditors. The person, firm or corporation files chapter 7 under state or federal bankruptcy to try to resolve its debt by liquidating qualifying assets to pay back its creditors. There are alternatives to total liquidation, these are under chapters 11,12 and 13 which reorganizes its financial structure. Financial decisions are usually under close supervision or must be approved by a designated court of law.

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