Simply put, when you owe a bunch of money and can’t possibly pay it all back – you declare bankruptcy. As the video explains, there are different kinds of bankruptcy, the most common being chapter 7.
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Going bankrupt is not a get-out-of-jail-free card. You get to keep the essentials, but all your assets like your car and house get sold off to repay the people you owe money to.
Furthermore, the bankruptcy will usually stay on record for at least 10 years afterwards. Good luck trying to get a loan when you have a history of not paying it back.
Bankruptcy as a Last Resort
While not a pleasant experience for anyone, bankruptcy exists as a last resort option that acts as a safety nest against the risks people take in business.
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