Bankruptcy is a term used to describe a situation when a person or other legal entity like a limited company is unable to pay what they owe, and then either voluntarily debtors petition or involuntarily creditors petition seek the protection of the court in dealing with their bankrupt estate.
In the UK today the number of personal bankruptcies is on a steady rise. This is due to a number of reasons including the unprecedented level of consumer debt in the UK and also because of the introduction of the Enterprise Act 2002.
Another reason that is seen to be contributing to the high lel of bankruptcies is the lack of awareness regarding alternative solutions to bankruptcy, such as the Individual Voluntary Arrangement.
The bankruptcy process in the United Kingdom is conducted under the authority of the Insolvency Service.
In Scotland bankruptcy is used loosely to describe two quite different situations.
Sequestration is the term used to describe the legal process in which you are formally declared insolvent (i.e. bankrupt) by the sheriff court).
This involves you granting a "Trust Deed" for creditors
To learn more about the process of bankruptcy, read our online guide to bankruptcy.