PERSONAL BANKRUPTCY Meaning and
Definition
-
Personal bankruptcy refers to a legal process undertaken by individuals who are unable to repay their debts to creditors. It is a form of financial insolvency where an individual's total liabilities exceed their available assets and their income is insufficient to cover the outstanding debts. Personal bankruptcy is often viewed as the last resort for individuals facing overwhelming financial difficulties and provides them with a chance to eliminate or restructure their debts, thereby allowing for a fresh financial start.
The process of personal bankruptcy involves filing a petition in a court of law, typically governed by specific bankruptcy laws applicable to the given jurisdiction. Once filed, the debtor's assets and liabilities are assessed by a trustee who oversees the bankruptcy proceedings. The trustee may liquidate non-exempt assets to repay a portion of the debts to the creditors. Depending on the type of bankruptcy filed, such as Chapter 7 or Chapter 13 in the United States, a debtor may either have their eligible debts discharged entirely or enter into a court-approved repayment plan.
Personal bankruptcy has both immediate and long-term consequences. While it provides relief from creditor harassment and the collection of debts, it also results in a significant negative impact on the debtor's creditworthiness. Bankruptcy filings typically remain on an individual's credit report for a designated period, limiting their ability to acquire credit or loans in the future. Moreover, personal bankruptcy may involve the sale of valuable assets and can have emotional and psychological implications for the debtor.
Overall, personal bankruptcy is a legal process that provides individuals facing overwhelming financial obligations with a chance to obtain relief from their debts, albeit with the trade-off of significant consequences for their credit records and personal well-being.
Etymology of PERSONAL BANKRUPTCY
The word "personal bankruptcy" originated from a combination of two terms: "personal" and "bankruptcy".
- "Personal" originates from the Latin word "persona", meaning "mask" or "character". It later evolved to refer to an individual human being and gained its current meaning referring to one's private or individual matters.
- "Bankruptcy" has its roots in the Late Latin word "bankruptus", formed by combining "banca" (bench or table) and "ruptus" (broken). It refers to the inability of a person or entity to repay their debts and the consequent legal status of being incapable to meet financial obligations.
The term "personal bankruptcy" thus refers to the individual's financial state when they are unable to pay off their debts, resulting in a legal declaration of bankruptcy.
