Bankruptcy as accepted universally is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Bankruptcy can be classified as Voluntary and Involuntary. The bankruptcy initiated by the debtor who is an individual or organization is called Voluntary Bankruptcy whereas the bankruptcy initiated by a Creditor against the individual or corporate debtor is called the Involuntary Bankruptcy.
An involuntary bankruptcy petition may not be filed against an individual consumer debtor who is not engaged in business.
Bankruptcy was originally planned as a remedy for creditors and not debtors. Creditors may file a bankruptcy petition against a business or corporate debtor in an effort to recoup a portion of what they are owed or initiate a restructuring.
During the time of King Henry VIII, bankruptcy law allowed a creditor to seize all of the assets of a trader or business who could not pay his debts. Additionally, on top of losing all of his property, the debtor has to loose his freedom and is also subject to imprisonment for failure to pay his debts. It is very common that individuals are driven to suicide by loan collectors or the defaulters killing their bankers / financiers. This leaves the family of the debtor in the position of having to pay the debts in order to obtain the release of the debtor. Even though the Individuals filing for bankruptcy are rarely seen or noticed.