Bankruptcy is initiated and filed by a debtor in order to pay the necessary amount that the borrower has failed to comply. It's a method of settling terms about the debt of the borrower or organization when they do not meet their obligations. This is to compensate the creditor.
There are several types of bankruptcy that you might be interested in reading about. They were given corresponding chapters from the U.S. bankruptcy code. They are Chapters 7, 11, 12, and 13. For Chapter 7, the usual term is "I'm filing for bankruptcy" also known as the elimination bankruptcy, meaning the custody has liquidated all the non-exempt assets held by the borrower, in order to pay as close to the exact amount in debt as possible. Every person, corporation, and partnership is accountable in this chapter except for businessmen. Chapter 11 is the most complicated bankruptcy type as it accounts for the problems of businesses. In this chapter, the borrower can continue to generate and manage ownership of all assets, and can reconstruct a plan for when to pay back the creditors. They have a minimum of 120-day time limit to pay their debts, if not creditors can now impose their own plans.
Chapter 12 is particularly for the owner of farms. The borrower still has control of their assets, and can put up plans as to when to pay their debts. Chapter 13 is similar to Chapter 11, but it is specifically for individuals. The borrower still has control and ownership over their property or assets and they can pay their debts within a minimum of three to five years. It might be dismissed based on the net income of the borrower.