Bankruptcy is the word which will make your feet cold. This is because there are many misconceptions and wrong notions about this concept.  We frequently hear about many individuals and companies going bankrupt.  But we never try to go in depth of the concept. What exactly is bankruptcy? Well the answer is here. When an individual or a corporation is unable to meet the debts or pay off the bills, this legal proceeding helps them out. This proceeding officially announces that the person can no more repay his debts. The matter being legal, no creditor can thereon directly ask the borrower for debt repayment. The finances are now under the court’s control.The court appoints a liquidator for this purpose who arranges to make the payment to the creditors from the income or the assets of the individual. It is an arrangement which allows the borrower to pay off the creditor’s dues in the best possible manner, of course, under complete legal supervision.While filing for bankruptcy a person needs to prove in the court that he neither has any other income source nor the assets to pay off the debts. The person needs to prove that he has no option left but file for bankruptcy. This legal proceeding puts a curb on interest accumulation. And so what now needs to be paid is the proportion of the principal amount. The liquidator divides the income source and assets and pays off proportionately to the creditors.The main motive of bankruptcy is that the debtor can make a fresh inception in connection to matters that relate to finances.  As time passes, bankruptcy will not matter much if the individual has recreated credit lines and has improved his credit rating. He can now make a fresh start with finances and get a fair chance to better the credit score. Bankruptcy is not an end but it is a new beginning.